Question

Tomasine Company's retained earnings increased by 50,000 during the current year. Net income for the year was 110,000. No other information is available regarding retained earnings. In its statement of cash flows, Tomasine should report?

Answer 1

To set up a T-account balance sheet for the bank, assets (reserves, loans, and government bonds) are listed on one side and liabilities (deposits) on the other. The bank's net worth is calculated by subtracting liabilities from assets, resulting in a net worth of $220.

Step-by-step explanation:

To set up a T-account balance sheet for a bank, we must list the bank's assets on one side and its liabilities and net worth (or equity) on the other. The following is the bank's T-account balance sheet:

• Assets:
  
• Liabilities and Net Worth:
  

The total assets of the bank amount to $620 ($50 in reserves + $500 in loans + $70 in government bonds). The total liabilities are $400 (in deposits).

To calculate the bank's net worth, subtract the total liabilities from the total assets:

Net Worth = Total Assets - Total Liabilities

Net Worth = $620 - $400 = $220

Therefore, the bank's net worth is $220.