Question

If the founders of a bank have sold $100,000 worth of shares of stock, some to themselves and some to other people, the balance sheet will read

Multiple choice question.
A. assets (Cash) = $50,000 and Liabilities and Net worth (stock shares) = $50,000.
B. assets (Cash) = $100,000 and Liabilities and Net worth (stock shares) = $100,000.

Answer 1

A bank's balance sheet lists its assets and liabilities, and its net worth is calculated by subtracting liabilities from assets. In the given scenario, the bank's net worth would be $220.

Step-by-step explanation:

A bank's balance sheet lists the assets and liabilities of the bank, representing what the bank owns and owes. Assets include cash held in the bank's vaults, reserves held at the Federal Reserve bank, loans made to customers, and bonds purchased. Liabilities include deposits made by customers. The net worth or bank capital is calculated by subtracting the liabilities from the assets.

In the given scenario, the bank's assets would include the $50 in reserves, the $500 in loans, and the $70 in government bonds, totaling $620. The liabilities would be the $400 in deposits from customers. Therefore, the bank's net worth would be $620 - $400 = $220.