Question

The following balance sheet for the Hubbard Corporation was prepared by the company: HUBBARD CORPORATION Balance Sheet At December 31, 2024 Assets Buildings $ 763,000 Land 289,000 Cash 73,000 Accounts receivable (net) 146,000 Inventory 266,000 Machinery 293,000 Patent (net) 113,000 Investment in equity securities 86,000 Total assets $ 2,029,000 Liabilities and Shareholders' Equity Accounts payable $ 228,000 Accumulated depreciation 268,000 Notes payable 526,000 Appreciation of inventory 93,000 Common stock (authorized and issued 113,000 shares of no par stock) 452,000 Retained earnings 462,000 Total liabilities and shareholders' equity $ 2,029,000 Additional information: The buildings, land, and machinery are all stated at cost except for a parcel of land t

Answer 1

A balance sheet reflects a company's financial position, listing assets, liabilities, and equity. In banking, assets include cash and loans, while liabilities encompass customer deposits and debts. Changes in a bank's business plan, like issuing loans, directly affect its balance sheet.

Step-by-step explanation:

A balance sheet is a fundamental accounting tool that represents a company's financial position at a specific point in time, listing all of its assets and liabilities. An asset is something of value that the entity owns, which it can use to produce income or to repay debts, such as cash or real estate. Conversely, a liability represents an obligation or debt that the entity must fulfill, which might include loans or accounts payable. The difference between the total assets and total liabilities is referred to as equity or net worth, also known as bank capital in the context of a financial institution.

A bank's balance sheet operates in a similar way to any other business balance sheet. On the asset side, a bank lists items such as the cash it holds in its vaults, investments, and loans it has provided to customers. Regarding liabilities, typical items include deposits from customers and any debts or other obligations the bank has incurred. The net worth or capital gives an insight into the bank's cushion against losses and its ability to lend.

When a bank changes its business plan, such as issuing a new loan, its balance sheet will reflect these changes. For instance, if a bank grants a significant loan to a customer, its cash reserves will decrease, and the amount listed under loans will increase, while its deposits and overall net worth might stay the same.