Below is the balance sheet for SFCC Mutual Bank when they opened this morning. F

Question

Below is the balance sheet for SFCC Mutual Bank when they opened this morning. For the following exercises assume that the reserve requirement is 10% and the bank does not want to take any money out of reserves. During the course of the day they purchased $50,000 in securities and made a $125,000 loan. Right before the bank closed, someone withdrew $50,000 from their checking account. What was the status of the balance sheet when the bank closed for the day? Assets Liabilities P, P & E R.R. E.R. Loans Cash 750,000.00 Shareholders' Equity 1,000,000.00 s 50,000.00 Checkable Deposits 500,000.00 $ 25,000.00 S 325,000.00 S 350,000.00 l. There is in required reserves and in excess reserves 2. There is in cash. 3. There is in checkable deposits 4. The $50,000 purchase of securities goes in the column. (assets/iabilities) 5. The total dollar value of the assets column is and the total dollar value of the liabilities column is

Explanation / Answer

Ans:

A) Balance Sheet after purchase of securities and making a loan.

1) Required reserves = $450,000 * 10%

= $45000

Excess reserves = Total reserves - Required reserves

= ($50,000 + $25000) - $45000

= $30,000

2) Cash = $125,000

3) Checkable Deposits = $450,000

4) Column = assets

5) Total assets = $1,450,000

Total liabilities = $1,450,000

Assets Amount($) Liabilities Amount($) P,P & E 750,000 Shareholder's Equity 1,000,000 R.R. 45,000 Checkable Deposits($500,000 - $50,000) 450,000 E.R. 30,000 Loans($325,000+ $125,000) 450,000 Securities 50,000 Cash($350,000 - $50,000 - $125,000-$50,000) 125,000 Total 1,450,000 Total 1,450,000

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