Question

In preparing its May 31, 2017 bank reconciliation, Catt Co. has the following information available: Balance per bank statement, 5/31/17 $40,000 Deposit in transit, 5/31/17 5,400 Outstanding checks, 5/31/17 4,900 Note collected by bank in May 1,250 The correct balance of cash at May 31, 2017 is___________.

Answer 1

The bank's net worth is calculated by subtracting its liabilities from its assets. In this case, the net worth of the bank is $220.

Step-by-step explanation:

In creating a T-account balance sheet for the bank, we must list the bank's assets and liabilities to calculate its net worth. Assets generally include reserves, loans, and bonds, whereas liabilities primarily consist of the deposits from the bank's customers.

Bank Assets:

• Reserves: $50
• Government Bonds: $70
• Loans: $500

Bank Liabilities:

• Deposits: $400

To find the bank's net worth, we subtract the liabilities from the assets:

Net Worth = (Reserves + Government Bonds + Loans) - Deposits

Net Worth = ($50 + $70 + $500) - $400

Net Worth = $220

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