Question

_____ earnings are cumulative earnings from the firm's profitable operations that were kept in the business and not paid out to stockholders in distributions for company profits.

a) Retained
b) Net
c) Gross
d) Accrued

Answer 1

A T-account balance sheet shows assets and liabilities, with the bank's net worth being calculated by subtracting liabilities from assets. For the bank in question, with $50 in reserves, $70 in government bonds, and $500 in loans versus $400 in deposits, the net worth is calculated to be $220.

Step-by-step explanation:

Banking Transactions and T-Account Analysis

The scenario describes a bank that has conducted various financial transactions including the holding of reserves, purchase of government bonds, and issuance of loans. The question involves setting up a T-Account balance sheet, which depicts the bank's financial standing through its assets and liabilities, and calculating the net worth of the bank.

To complete a T-account for the bank:

• Assets:
  
• Liabilities:
  

The total assets are the sum of reserves, government bonds, and loans, amounting to $620 ($50 + $70 + $500). The bank's total liabilities are the deposits, which amount to $400. The net worth (also known as equity) of the bank is calculated by subtracting the total liabilities from the total assets. Therefore, the net worth of the bank would be $220 ($620 - $400).