Question

For each of the following T-accounts, compute the ending balance.

a) Debit = $500, Credit = $200
b) Debit = $1,000, Credit = $800
c) Debit = $300, Credit = $400
d) Debit = $700, Credit = $700

Answer 1

The ending balance for each T-account is calculated by subtracting credits from debits. For the bank's T-account, the assets include reserves, government bonds, and loans, while liabilities include deposits. The bank's net worth is total assets minus total liabilities, or $220 in this case.

Step-by-step explanation:

To calculate the ending balance for each T-account:

a) Debit = $500, Credit = $200, Ending Balance = $300 (Debit side)

b) Debit = $1,000, Credit = $800, Ending Balance = $200 (Debit side)

c) Debit = $300, Credit = $400, Ending Balance = $100 (Credit side)

d) Debit = $700, Credit = $700, Ending Balance = $0 (Balanced)

To set up a T-account balance sheet for the bank:

Assets:

Reserves: $50

Government Bonds: $70

Loans: $500, Liabilities Deposits: $400

Net Worth is calculated as Total Assets - Total Liabilities.

Total Assets = $50 (Reserves) + $70 (Government Bonds) + $500 (Loans) = $620

Total Liabilities = $400 (Deposits)

Thus, Net Worth = $620 - $400 = $220.