Question

A company's bank statement shows a cash balance of $4,270. Comparing the company's cash records with the monthly bank statement reveals several additional cash transactions such as checks outstanding of $2,180, NSF check of $210, interest earned of $31, service fee of $44, and a check for $140 recorded twice by the company

Answer 1

The net worth of the bank is calculated by setting up a T-account balance sheet and subtracting total liabilities from total assets. With the reserves at $50, government bonds at $70, and loans at $500, the bank's total assets amount to $620. After deducting deposits (liabilities) of $400, the net worth is found to be $220.

Step-by-step explanation:

To establish the net worth of the bank using the information provided, we need to set up a T-account balance sheet displaying the bank's assets and liabilities. The assets include reserves, government bonds, and loans made to customers, whereas the liabilities are primarily the deposits from the customers. The net worth, also known as the bank's equity, is calculated by subtracting total liabilities from total assets.

Assets

• Reserves: $50
• Government Bonds: $70
• Loans: $500

Liabilities

• Deposits: $400

Now calculating the 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