Question

The Jaguar Bank of Indianapolis (JBI) starts operations on January 1, 2020 issuing equity amounting $50. JBI advertises an annual interest of 1% for its savings deposits, paid annually, and free checking accounts (i.e., no maintenance fee). On the first day of operations, JBI receives a total of $500 as checking deposits and $450 as savings deposits. The bank lends $750 for an annual interest rate of 5%. It purchases treasury bonds worth $150 which earns 2% per annum. JBI maintains the required reserve (10% of checking deposit balances) at the Fed and keeps the remaining liquidity in cash reserves. Federal Reserve pays no interest on JBI’s reserve account. Nor does JBI on checking accounts of its customers. JBI’s operational expenses during its first year of operations is $20 and the corporate tax rate is 25%. Shareholders of JBI receive 12% dividends.

A customer defaults a loan amounting $250. The bank loses the principal amount as well as the expected interest income but repossess a property maintained as a collateral. The property is auctioned for $200 and $100 of the proceeds are used to purchase treasury bonds. Find the following.

• Primary Reserves = $
• Total Assets = $
• Total Liabilities = $
• Net Worth = $
• Equity Ratio =  %
• Interest Income = $
• Net Profit Before Taxes = $

pleas answer this question because I posted before and the answers were wrong

Answer 1

Primary Reserves = $50 ( Federal Reserve)

General Reserve ( Retained Earnings ) = -$52.50

Total Assets = $947.50

Total Liabilities = $950

Networth = -$2.50

Debt- Equity Ratio = Total liabilities / equity

Debt Equity Ratio = 950/50 = 19 times

Interest Income = $23.50

Net Profit Before Tax = -$46.50

Information given;

Particulars	Amount	Interest rate
Equity	$50.00
Checking Deposits	$500.00	0.00%
Savings Deposits	$450.00	1.00%
Loan	$750.00	5.00%
Treasury Bonds	$150.00	2.00%
loan defaulted	$250.00
recovered	$200.00

Computation Of Interest Income

Particulars	Amount
Interest Income
loan	$37.50	$750*5%
Treasury Bonds	$3.00	$150*2%
Total Interest Income	$40.50
less:
savings deposit	$4.50	$450*1%
Interest on loan defaulted	$12.50	$250*5%
Total Interest Expense	$17.00
Net Interest Income	$23.50

Alternatively, total Interest Income = $37.50 - $12.50 +$3 = $28

Total Interest Expense = $4.50

Net Interest Expense = $23.50

Computation Of Cash Balance

Particulars	Amount
Receipts:
Equity	$50.00
Checking Deposits	$500.00
Savings Deposits	$450.00
Interest	$28.00
Property Auctioned	$200.00
	$1,228.00
Payments
Loan	$750.00
Treasury Bonds	$250.00
Savings Interest	$4.50
Federal Reserve	$50.00
Operating Expense	$20.00
Dividend	$6.00
	$1,080.50
Cash Balance	$147.50

Computation Of Retained Earnings

Particulars	Amount
Income from opertaing activities
Net Interest Income	$23.50
Loss on loan defaulted	$50.00
operational expenses	$20.00
Net Loss	-$46.50
Tax (25%)	$0.00
Dividend	6
Retained Earnings	-$52.50

Balance Sheet as on December 31 2021

Liabilities		Assets
Equity	50	Assets	750
Retained Earnings	-$52.50	Federal Reserve	50
Liabilities	$950.00	Cash Balance	$147.50
	$947.50		$947.50

Assumptions

Default of loan payment at the end of the year