Question

[The following information applies to the questions displayed below.]

The general ledger of Jackrabbit Rentals at January 1, 2021, includes the following account balances:
Accounts Debits Credits
Cash $ 41,500
Accounts Receivable 25,700
Land 110,800
Accounts Payable 15,300
Notes Payable (due in 2 years) 30,000
Common Stock 100,000
Retained Earnings 32,700
Totals $ 178,000 $178,000
The following is a summary of the transactions for the year:
1. January 12 Provide services to customers on account, $62,400.
2. February 25 Provide services to customers for cash, $75,300.
3. March 19 Collect on accounts receivable, $45,700.
4. April 30 Issue shares of common stock in exchange for $30,000 cash.
5. June 16 Purchase supplies on account, $12,100.
6. July 7 Pay on accounts payable, $11,300.
7. September30 Pay salaries for employee work in the current year, $64,200.
8. November 22 Pay advertising for the current year, $22,500.
9. December 30 Pay $2,900 cash dividends to stockholders.
The following information is available for the adjusting entries.
Accrued interest on the notes payable at year-end amounted to $2,500 and will be paid January 1, 2022. Accrued salaries at year-end amounted to $1,500 and will be paid on January 5, 2022. Supplies remaining on hand at the end of the year equal $2,300.
Record closing entries. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

To calculate a bank's net worth, we subtract its total liabilities from its total assets. In this scenario, the bank's net worth is calculated to be $220, with total assets of $620 (reserves of $50, government bonds of $70, and loans of $500) and total liabilities of $400 (deposits).

Step-by-step explanation:

When constructing 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 to ensure the balance sheet balances. The assets include reserves, government bonds, and loans, while the liabilities consist primarily of deposits. Equity is calculated as the difference between total assets and total liabilities, which represents the net worth of the bank. Now, let's create the balance sheet based on the given information:

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

The total assets equal $620 ($50 in reserves + $70 in bonds + $500 in loans).

• Deposits: $400

The total liabilities equal $400 in deposits.

To find net worth, we subtract the total liabilities from the total assets:

Net Worth = Total Assets - Total Liabilities
Net Worth = $620 - $400
Net Worth = $220

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