Final answer:
A T-account balance sheet shows that the bank has total assets of $620 and total liabilities (deposits) of $400, which gives it a net worth of $220.
Step-by-step explanation:
When setting up a T-account balance sheet for a bank, we list the bank's assets on one side and its liabilities and net worth (or equity) on the other side. In this case, the bank's assets include reserves of $50 and loans made which amount to $500, as well as government bonds purchased worth $70. The total assets, therefore, equal $620 ($50 + $500 + $70).
On the liabilities side, the bank has customer deposits totaling $400. The net worth of the bank is calculated by subtracting the total liabilities from the total assets. So, we subtract the deposits from the total assets to get the net worth: $620 (assets) – $400 (deposits) = $220 (net worth).
T-Account Balance Sheet:
- Assets:
- Reserves: $50
- Loans: $500
- Government Bonds: $70
- Liabilities:
- Deposits: $400
Net Worth: $220