Question

Use the following balance sheet data for the First National Bank to answer the next question. Assets Liabilities Net Worth Reserves $50,000 Checkable deposits $120,000 Loans 75,000 Stock shares 130,000 Securities 25,000 Property 100,000 If a check for $14,000 is drawn and cleared against this bank, then its reserves and checkable deposits will be, respectively rev: 06_06_2018 Multiple Choice $50,000 and $120,000. $50,000 and $106,000. $36,000 and $120,000. $36,000 and $106,000.

Answer 1

Answer:

Reserves & Checkable deposits will equal to $36,000 and $106,000

Explanation:

The amount of checkable deposits is given $120,000 on the liabilities side. So, the withdrawal and clearance of check worth $14,000 will lead to a decline in the number of checkable deposits by $14,000. As a result, the remaining amount of checkable deposits will equal to $106,000 ($120,000 - $14,000).

To maintain the balance on asset & liabilities side of the balance sheet, the asset side will also reduce by $14,000. $14,000 will be deducted from the reserves of the bank. As a result, the remaining amount of reserves is equal to $36,000 ($50,000 - $14,000).