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In: Accounting

Consider the balance sheet of the following bank.                                   &nbsp

Consider the balance sheet of the following bank.

                                           Chase

     ------------------------------------------------------------------------------

     Reserves        3000       Checkable Deposits      5000

     Loans             7000       Savings and Time Deposits 8000  

     Bond Holdings      4000      Equity               1000

     Using balance sheets, show all the balance sheet steps of Chase making a loan of $1000. Provide a brief explanation for each step and assume that the loan check is re-deposited in another bank (provide a balance sheet for that bank as well). Verify how the money supply (M2) changes as a result

Solutions

Expert Solution

Journal Entry for making loan.
Debit Credit
Bank A $1000
Loan $1000
(Being loan taken and loan amount received through check.)
Loan has properties of credit balance , we have increased the
loan credit has been given on other hand Cash / Bank account
has propertis of debit balance ,our cash / bank balance
has been increased due to loan hence debit is given to
bank account.
Effect On Balance Sheet :
Increase in liabilty side ( loan)
Increase in asset side (bank balance)
Revised Balance Sheet
Reserve $          3,000 Chekable Deposits (50000+1000) $         6,000
Loans (7000+1000) $          8,000 Saving And Time Deposits $         8,000
Bond Holding $          4,000 Equity $         1,000
Total $        15,000 Total $       15,000

ekkarill92 answered 6 months ago
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