Question

In: Accounting

Note:  Treat each of the questions below as a separate question.  There is no carry over from one...

Note:  Treat each of the questions below as a separate question.  There is no carry over from one question to the next.

  1. Show the effect of a bond sale of $200 to replenish cash reserves

Assets                                                                          Liabilities

  1. Show the effect of a shift of $30 from a savings account to a checking account

Assets                                                                          Liabilities

   

  1. Show the effect on reserves and net worth if a bank sells stock worth $50 to raise cash

Assets                                                                    Liabilities

                        

  1. Show the effect of borrowing $100 to offset a withdrawal from a savings deposit of $100

Assets                                                        Liabilities

  1. Show the effect on securities and reserves of a bond purchase of $50

Assets                                                        Liabilities

Solutions

Expert Solution

1)

A) Bond Sold and receieved Cash (it is taken a bond issued)

Asset : $200

Liabilities : $200

Cash is increased and Bonds payable is increased

B) If it is taken as bonds in investment sold

Assets : 0 ($250-$250)

Liabilities : 0

Bonds in investment portfolio decreased and cash increased

2) Shift from Savings account to Checking account.

Assets : 0 ($30-$30)

Liabilities : 0

Amount transferred from Savings account to Checking account (both are part of Cash & Equivalents)

3)

A) Sold stock worth 50 to receive cash (Taken as investments held are now sold)

Assets : $0 ($50-$50)

Liabilities : 0

Investment in assets decrease and cash balance increase. No change in net worth.

B) If it is taken as stocks issued (stock sold)

Assets : $50

Liabilities : $50

Networth will increase by $50 due to increase in common stock value

4) Question is not clear

A) Assumed it as withdrawal of $100 from savings account

Assets : 0 ($100-$100)

Liabilities : 0

Savings account balance is decreased and Cash in hand balance is increased

B) If it is assumed a borrowing of $100

Assets : $100

Liabilities : $100

Borrowings will increase and Cash & Equivai will also increase

5) Bond Purchase $50

Assets : 0 ($50-$50)

Liabilities : 0

When a bond purchased, it increases investment balance and also decrease the Cash & Equivalents. No change in reserves

Note :

Some words have two meanings, so answered this question keeping in view of those two meanings. (Shown both the types)


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