Final answer:
To determine the net worth of a bank, a T-account balance sheet is created showing assets, including reserves, government bonds, and loans, against liabilities such as deposits. Subtracting the liabilities from the assets provides the bank's net worth, which in this case is $220.
Step-by-step explanation:
A bank's balance sheet showcases its financial position by listing its assets, liabilities, and net worth. For a bank with deposits of $400, reserves of $50, government bonds worth $70, and loans of $500, a T-account balance sheet format can be set up to reflect these figures. To calculate the net worth of the bank, also known as the bank's equity, the total liabilities need to be subtracted from the total assets.
Let's start with the assets and liabilities for this hypothetical bank.
Assets:
Reserves: $50
Government Bonds: $70
Loans: $500
Liabilities:
Deposits: $400
Now, since assets equal liabilities plus net worth, we can calculate the bank's net worth as follows:
Total Assets = Reserves + Government Bonds + Loans = $50 + $70 + $500 = $620
Total Liabilities = Deposits = $400
Net Worth = Total Assets - Total Liabilities = $620 - $400 = $220
Thus, the bank's net worth is calculated to be $220.
The complete question is:
On July 31, 2022, the general ledger of Sunland Legal Services Inc. showed the following balances: Cash $3,520, Accounts Receivable $1,320, Supplies $440, Equipment $4,400, Accounts Payable $3,610, Common Stock $3,080, and Retained Earnings $2,990. During August, the following transactions occurred.
Aug. 3 Collected $1,060 of accounts receivable due from customers.
5 Received $1,140 cash for issuing common stock to new investors.
6 Paid $2,380 cash on accounts payable.
7 Performed legal services of $5,720, of which $2,640 was collected in cash and the remainder was due on account.
12 Purchased additional equipment for $1,060, paying $350 in cash and the balance on account.
14 Paid salaries $3,080, rent $790, and advertising expenses $240 for the month of August.
18 Collected the balance for the services performed on August 7.
20 Paid cash dividend of $440 to stockholders.
24 Billed a client $880 for legal services performed.
26 Received $1,760 from Laurentian Bank; the money was borrowed on a bank note payable that is due in 6 months.
27 Agreed to perform legal services for a client in September for $3,960. The client will pay the amount owing afterthe services have been performed.
28 Received the utility bill for August for $240; it is not due until September 15.
31 Paid income tax for the month $440.
• a. Using T-accounts, enter the beginning balances to the ledger.
• b. Journalize the August transactions
• c. Post the August journal entries to the ledger
• d. Prepare a trial balance on August 31, 2022.