The southeast mutual bank's asset reserve T-account will be debited by $1,500,000 and the liability T-account to be credited by $1,500,000.
<h3>What are reserves?</h3>
Bank reserves are the cash minimums required by financial institutions to meet central bank requirements. This is real paper money that the bank must keep in an on-site vault or in its account at the central bank.
The required journal entry for the transaction is :
Dr. Assets Reserves $1,500,000
Cr Liabilities Deposits $1,500,000
The bank increased its cash reserves and liability by the same amount when it borrowed $1.5 million. The assets side of the T-account increased by $1,500,000, increasing bank reserves, and the liabilities side of the T-account increased by $1,500,000, increasing demand deposits.
Therefore, with the addition of reserves, the bank can make loans to borrowers and earn interest on them. Similarly, because the bank is the borrower, Hubert can withdraw the amount from the demand deposit.
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Your question is incomplete, but most probably your full question was,
Suppose southeast mutual bank, walls fergo bank, and pjmorton bank all have zero excess reserves. The required reserve ratio is 20%. Hubert, a client of southeast mutual bank, , deposits $1,500,000 into his checking account at the local branch.
Complete the following table to reflect any changes in southeast mutual bank's T-account (before the bank makes any new loans).
