Final answer:
A T-account balance sheet has assets comprising reserves, government bonds, and loans, and liabilities consisting of deposits. The bank’s net worth is assets minus liabilities, amounting to $220 for this bank, which indicates its stable financial position.
Step-by-step explanation:
Setting up a T-account Balance Sheet
To set up a T-account balance sheet for the bank with assets and liabilities as well as calculate the bank's net worth, we must understand the components of the balance sheet. The assets include the reserves and loans made by the bank, while the liabilities are primarily the deposits held by the bank's customers.
Assets:
- Reserves: $50
- Government Bonds: $70
- Loans: $500
Liabilities:
The net worth is calculated as the total assets minus total liabilities. Thus, the net worth of the bank is:
Net Worth = (Reserves + Government Bonds + Loans) - Deposits
Net Worth = ($50 + $70 + $500) - $400
Net Worth = $620 - $400
Net Worth = $220
The bank's balance sheet would reflect a positive net worth, indicating that the bank is in a stable financial position.