Following are selected balance sheet accounts for the Third State Bank: vault ca

Question

Following are selected balance sheet accounts for the Third State Bank: vault cash = $2 million; U.S. government securities = $5 million; demand deposits = $13 million; nontransactional accounts = $20 million; cash items in process of collection = $4 million; loans to individuals = $7 million; loans secured by real estate = $9 million; federal funds purchased = $4 million; and bank premises = $11 million.                                
                                                                                                                                                                                                                          a. From these accounts, select only the asset accounts and calculate the bank’s total assets.
b. Calculate the total liabilities for the Third State Bank.
c. Based on the totals for assets and liabilities, determine the amount in the owners’ capital account.

Explanation / Answer

(a)

Assets are: Vault cash, Government securities, Cash in collection process (Since it is an Account Receivable), Loans made (Since it is an Account Receivable), Fed Fund Purchased, Bank Premises (Non Current Assets).

So Total Assets = $(2 + 5 + 4 + 7 + 9 + 4 + 11) Million = $ 42 million

(b)

Liabilities are: Demand Deposits, Nontransaction Accounts.

So Total Liabilities = $(13 + 20) million = $33 million

(c)

Assets = Liabilities + Owner Capital

So, Owners Capital = Assets - Liabilities = $42 mill - $33 mill = $ 9 million

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