Question

Assume that Banc One receives a primary deposit of $1 million. The bank must keep reserves of 20 percent against its deposits. Prepare a simple balance sheet of assets and liabilities for Banc One immediately after the deposit is received.

Answer 1

Step-by-step explanation:

The preparation of the simple balance sheet of assets and liabilities is presented below:

Banc One

Simple balance sheet

Liabilities Amount Assets Amount

Deposits $1,000,000 Reserves $200,000

Cash $800,000

Total liabilities $1,000,000 Total assets $1,000,000

The reserve would be

= $1,000,000 × 2%

= $200,000

And the remaining balance is transferred to the cash balance

= $1,000,000 - $200,000

= $800,000