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
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A: A horizontal integration consists of companies that acquire a similar company in the same industry, while a vertical integrationconsists of companies that acquire a company that operates either before or after the acquiring company in the production process.
Answer:
Option D, E and F. See below for information.
Explanation:
Costs are capitalized when they form a principal part of the asset. These costs may include any costs that are needed to make the asset operational and any costs that are incurred to bring the asset to operating premises.
As such the $15,000 freight bill that brings the asset in premises, the invoice price of $500,000 which comprises the cost of the capital asset and the one time cost of $8,000 to tear down the wall and install the asset are all capital costs and are to be capitalized in the final cost of the asset to be recorded.
All other are annual expenses are not to be capitalized (Option a, b and c)
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