Question

The general ledger of Zips Storage at January 1, 2024, includes the following account balances:

Accounts Debits Credits
Cash $25,500
Accounts Receivable 16,300
Prepaid Insurance 13,800
Land 157,000
Accounts Payable $7,600
Deferred Revenue 6,700
Common Stock 152,000
Retained Earnings 46,300
Totals $212,600 $212,600

The following is a summary of the transactions for the year:

1. January 9 Provide storage services for cash, $143,100, and on account, $56,700.
2. February 12 Collect on accounts receivable, $52,400.
3. April 25 Receive cash in advance from customers, $13,800.
4. May 6 Purchase supplies on account, $11,000.
5. July 15 Pay property taxes, $9,400.
6. September 10 Pay on accounts payable, $12,300.
7. October 31 Pay salaries, $132,600.
8. November 20 Issue shares of common stock in exchange for $36,000 cash.
9. December 30 Pay $3,700 cash dividends to stockholders.
7. Prepare an adjusted trial balance.

Answer 1

The bank's T-account balance sheet lists reserves, government bonds, and loans as assets, and deposits as liabilities. The net worth, calculated as total assets minus total liabilities, is $220. This represents the value owned by the bank's shareholders.

Step-by-step explanation:

To create a T-account balance sheet for the bank, we must list the bank's assets on one side and its liabilities on the other. The difference between the two will give us the bank's net worth. In this scenario, the bank has the following assets and liabilities:

• Assets
• Reserves: $50
• Government Bonds: $70
• Loans: $500
• Liabilities
• Deposits: $400

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

Net Worth = Total Assets - Total Liabilities

Net Worth = ($50 reserves + $70 government bonds + $500 loans) - ($400 deposits)

Net Worth = $620 - $400

Net Worth = $220

The bank's net worth is therefore $220. This calculation shows that the bank's total assets amount to $620 ($50 in reserves, $70 in government bonds, and $500 in loans), and its total liabilities are $400 in the form of deposits. Subtracting the liabilities from the assets gives us the bank's net worth, which signifies the bank's equity, or the value owned by the bank's shareholders.