Question

Wright Inc. has a balance in a Passbook of $10,000 as on 31 December 2018. These are the other details:

1. Three cheques of $2,000, $1,500 and $2,500 were deposited in the bank on 30 December 2018 but were recorded in the bank statement in January 2019.
2. Cheque of $500 issued on 31 December 2018 was not presented for payment.
3. A dividend of $1,000 on stocks was credited in Bank Account, but not recorded in Cash Book.
4. A direct deposit of $400 was made in Bank Account by a customer, which was not recorded in Cash Book.
5. Bank charges of $100 were entered only in Bank Passbook
6. Balance as per Cash Book on 31 December 2018 was $14,200.

Answer 1

The adjusted balance in the Passbook on December 31, 2018, is $28,200.

Step-by-step explanation:

The Passbook Balance of Wright Inc. is $10,000 as of December 31, 2018. Let's calculate the adjusted balance:

• Deposits made on December 30, 2018, amounting to $2,000, $1,500, and $2,500, were not recorded in the Cash Book, but they will be added to the balance. So, add $6,000 to the balance.
• The cheque issued on December 31, 2018, amounting to $500, was not presented for payment, so it should be deducted from the balance. Subtract $500 from the balance.
• It is mentioned that a dividend of $1,000 on stocks was credited in the Bank Account but not recorded in the Cash Book. Since it is not recorded in the Cash Book, we need to deduct it from the balance. Subtract $1,000 from the balance.
• A direct deposit of $400 made by a customer was not recorded in the Cash Book. Since it is not recorded in the Cash Book, we need to deduct it from the balance. Subtract $400 from the balance.
• Bank charges of $100 were entered only in the Passbook. Since it is not recorded in the Cash Book, we need to deduct it from the balance. Subtract $100 from the balance.
• Balance as per Cash Book on December 31, 2018, was $14,200. So, add $14,200 to the balance.

Now, let's calculate the adjusted balance:

Adjusted Balance = Passbook Balance + Deposits - Cheque Issued - Dividend - Direct Deposit - Bank Charges + Cash Book Balance

Adjusted Balance = $10,000 + $6,000 - $500 - $1,000 - $400 - $100 + $14,200 = $28,200

Therefore, the adjusted balance in the Passbook on December 31, 2018, is $28,200.

Answer 2

We set up a T-account balance sheet for the bank with assets including reserves, government bonds, and loans, and liabilities consisting of deposits. After calculating total assets and total liabilities, we determined the bank's net worth to be the difference, which is $220 in this example.

Step-by-step explanation:

The subject involves preparing a T-account balance sheet for a bank and calculating the bank's net worth. A T-account has two sides, with assets on the left and liabilities and equity (net worth) on the right. To illustrate:

Bank T-Account Balance Sheet

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

The net worth (also known as owner's equity or bank capital) is the difference between total assets and total liabilities. To calculate the bank's net worth:

• 
  
• Total Assets = Reserves + Government Bonds + Loans = $50 + $70 + $500 = $620
• 
  
• Total Liabilities = Deposits = $400
• 
  
• Net Worth = Total Assets - Total Liabilities = $620 - $400 = $220

This T-account balance sheet and net worth calculation demonstrates the fundamental concepts of banking operations and bank capital management.