Final answer:
The correct net worth entry for a plant farm with assets of $500,000 and liabilities of $300,000 is $200,000. For the bank example provided, a T-account balance sheet showing $620 in total assets and $400 in deposits as liabilities would conclude a net worth of $220.
Step-by-step explanation:
If a plant farm has total assets of $500,000 and total liabilities of $300,000, the correct entry on the net worth line of a financial statement would be calculated by subtracting total liabilities from total assets. In this case, the net worth would be:
$500,000 (Total Assets) - $300,000 (Total Liabilities) = $200,000 (Net Worth).
On a bank's T-account balance sheet, the left side represents assets and the right side lists liabilities and net worth. The assets of a bank typically include reservations and loans, while liabilities mainly revolve around the deposits made by customers. The net worth or equity represents the bank's own capital and would be positive for a financially healthy bank.
For example, with the bank holding $50 in reserves, $70 in government bonds, and $500 in loans, and with $400 in deposits as liabilities, the net worth is calculated as follows:
- Assets:
- Reserves: $50
- Government Bonds: $70
- Loans: $500
- Total Assets: $620
- Liabilities (Deposits): $400
- Net Worth: $220 (Assets - Liabilities)
The net worth or equity is included in the liabilities side of the T-account so that the balance sheet equals zero, maintaining the accounting equation where assets equal liabilities plus equity.