Question

The June 30, 2024, year-end trial balance for Askew Company contained the following information: In addition, you determine that the June 30,2024, inventory balance is ( $ 40,000 ).

Answer 1

When the Fed buys $10 million in Treasury bonds from Acme Bank, Acme's balance sheet will undergo changes. The reserves will decrease by $10 million, the bonds will decrease by $10 million, and the loans will increase by $10 million.

Step-by-step explanation:

The Fed conducts an open market purchase by buying $10 million in Treasury bonds from Acme Bank. As Acme converts the bond sale proceeds to new loans, there will be changes on the balance sheet. Here is a sketch:

• Assets: Reserves decrease by $10 million to $20 million, Bonds decrease by $10 million to $40 million, and Loans increase by $10 million to $60 million.
• Liabilities: Deposits remain the same at $300 million.
• Equity: Equity remains the same at $30 million.