Question

Using the data below, calculate living expenses.

Assets $100,000
Liabilities 37,500
Prior years's net worth 32,500
Income 55,000

Answer 1

To find the net worth of the bank, sum up the total assets ($620) and subtract the total liabilities ($400), resulting in a net worth of $220.

Step-by-step explanation:

Calculating the Net Worth of a Bank

To calculate the net worth of a bank, also known as shareholder's equity, you subtract the total liabilities from the total assets. According to the following information, the bank's total assets and liabilities are provided. The assets consist of reserves, bonds, and loans, and the liabilities consist of deposits and equity.

Steps to Calculate the Bank's Net Worth:

Sum up all the assets: reserves ($50) + government bonds ($70) + loans ($500) = $620 in total assets.

Sum up all the liabilities: deposits ($400) + equity (not part of the liabilities but part of shareholder's equity).

Subtract the total liabilities from the total assets to find the net worth: $620 (assets) - $400 (liabilities) = $220.

The bank's net worth is $220. Remember that in this context, 'equity' represents the bank's net worth and is not considered a liability.