Final answer:
The question involves calculating the adjusted cash balance for Easton Co. It also examines the effects of banking transactions on bank balance sheets, including loans issued by Singleton Bank and the Federal Reserve's open market operations with Acme Bank. Understanding these transactions helps illustrate basic principles of banking operations and regulatory requirements.
Step-by-step explanation:
The subject of this question is the determination of an adjusted cash balance for Easton Co., considering cash receipts, cash payments, and reconciling items reflected on a bank statement. The given scenario involves a comparison between the company's cash book balance and the bank statement balance, along with additional banking transactions, such as Singleton Bank issuing a loan to Hank's Auto Supply and the Federal Reserve's open market operations with Acme Bank.
In the case of Easton Co., to compute the adjusted cash balance, we need to identify and adjust for any outstanding checks, deposits in transit, bank errors, or any other reconciling items not accounted for in the bank statement. For the Singleton and First National Bank example, a loan issued by Singleton to Hank's Auto Supply increases both the loans on Singleton's balance sheet and the deposits and reserves at First National by $9 million, while First National must maintain 10% of this as required reserves.
For the Acme Bank scenario, after the Fed's open market sale of $10 million in Treasury bonds, Acme Bank's balance sheet changes as it reduces its loans to restore its required reserves to the mandatory 10% of deposits. A sketch of the balance sheets before and after these transactions will reflect the changes in Assets and Liabilities for both Singleton Bank and Acme Bank.