Final answer:
The value of Total Assets is determined by adding Total Liabilities and Total Equity, resulting in $6,700. For the bank's T-account, Total Assets are $620, and Net Worth is calculated as Total Assets minus Total Liabilities, resulting in a net worth of $220. The net change in Total Liabilities after borrowing $67,000 from a bank is an increase of $67,000.
Step-by-step explanation:
When calculating the value of Total Assets for a company, we can use the basic accounting equation. This equation states that Assets = Liabilities + Equity. Given that Total Liabilities are $3,900 and Total Equity is $2,800, we simply add these two amounts together to find the Total Assets.
Total Assets = Total Liabilities + Total Equity
= $3,900 + $2,800
= $6,700
Evaluating the transactions:
- Purchasing equipment for $50,000 in cash will decrease cash assets by $50,000 and increase equipment assets by $50,000, resulting in no net change in total assets. Liabilities and equity are unaffected.
- Borrowing $67,000 from a bank increases cash assets by $67,000 and increases liabilities by $67,000. There is no immediate impact on equity. The net change in Total Liabilities would be an increase of $67,000.
Setting up a T-account balance sheet for the bank as requested:
AssetsLiabilitiesReserves: $50Deposits: $400Bonds: $70Loans: $500
Total Assets:
$620
Total Liabilities + Equity:
$400 + Net Worth
Net Worth is calculated by subtracting Total Liabilities from Total Assets. If the bank's Total Assets are $620 and the Total Liabilities are $400:
Net Worth = Total Assets - Total Liabilities
= $620 - $400
= $220