Question

Assume the following information for Kingbird Corp. Accounts receivable (beginning balance) $139,000 Allowance for doubtful accounts (beginning balance) 11,370 Net credit sales 944,000 Collections 908,000 Write-offs of accounts receivable 5,300 Collections of accounts previously written off 1,800

Answer 1

To create the T-account balance sheet, we list the bank's reserves, loans, and government bonds as assets, and the deposits as liabilities. Subtracting the liabilities from the assets, we find the net worth to be $220.

Step-by-step explanation:

To set up a T-account balance sheet for the bank, we must list the bank's assets on one side and the liabilities and net worth (equity) on the other. The assets of the bank include its reserves and any loans it has made or government bonds it has purchased. The liabilities are primarily the deposits from customers. Net worth is calculated by subtracting total liabilities from total assets.

Bank's T-Account Balance Sheet:

Assets:

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

Liabilities:

• Deposits: $400

To calculate the bank's net worth, subtract the total liabilities from the total assets:

Total Assets = Reserves + Loans + Government Bonds = $50 + $500 + $70 = $620

Total Liabilities = Deposits = $400

Net Worth = Total Assets - Total Liabilities = $620 - $400 = $220