Assume company x deposits $100,000 in cash in a commercial bank. If no excess reserves exist at the time this deposit is made and the reserve ratio is 20 percent, the bank can increase loans by a maximum of $500,000.
Reserve ratio = 20% = 20/100 = 0.25
Initial Money supply = (1/Reserve ratio)*New Deposit = (100,000/0.25) = $ 400,000
Reserve ratio = Rerserve / Deposit
=> Reserves = 0.25*100,000 = 25,000
Max Increase in Money Supply = Initial Money Supply + Reserves/ Reserve Ratio
= $ 400,000 + 100,000
= $ 500,000.
The term commercial bank refers to financial institutions that accept deposits, provide checking account services, issue various loans, and provide basic financial products such as certificates of deposit (CDs) and savings accounts to individuals and small businesses. refers to
Learn more about the commercial banks at
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One of the goals of the federal reserve is price stability. For the Fed to achieve this goal, <span>the rate of inflation should be low, such as 1% to 3%, and should be fairly consistent.
When an organization is wanting to find price stability, they are meaning they want to avoid inflation and deflation. Although it's very hard to have no deflation or inflation, 1-3% is a low number that they are okay with. Inflation is a rise in the price whereas deflation is a decrease in the price.
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Answer:
$8,500
Explanation:
The computation of the cash balance at the end of March is shown below:
Opening Cash Balance $3,000
Add: Cash Collection from Sales $53,500 (($50,000 × 65%) +($60,000 × 35%)
Total Cash Available $56,500
Less: Cash Payments
Inventory $19,000 (($20,000 × 50%) + ($18000 × 50%)
S&A Expense $4,000
Loan & Int Payment $25,000
Depreciation - (Non Cash Expense)
Closing Cash Balance $8,500
We simply added the cash receipts and deduct the cash payments to the opening cash balance so that the ending cash balance could come
B; loaning money, the rest are not.
Answer:
a. Cash basis - Service revenue is $900
b. Accrual basis - Service revenue is $2,100 (which is $1200 + $900)
Explanation:
In accounting, there are 2 basis for recognizing transactions; these are cash basis and accrual basis.
In cash basis, sales and expenses are not recorded unless cash has been collected and paid respectively. In the accrual basis of accounting, expenses and sales are recorded when incurred and earned respectively.
Revenue earned under the accrual basis would therefore include the revenue for which cash has been collected and those for which cash is yet to be collected.