Consider a bank with the following balance sheet: Assets Required reserves $10 Excess reserves $27 Loans $70 million million million Required reserves S Excess reserves Loans Liabilities Checkable deposits Bank capital Assume that required reserves are 8%. In order to avoid insolvency, regulators decide to provide the bank with $27 million in bank capital. Assume that bad news about mortgages is featured in the local newspaper, causing a bank run. As a result, $40 million in deposits is withdrawn. Show the effects of the capital injection and bank run on the balance sheet. (Round your responses to the nearest whole number.) Assets million million million $120 million - $13 million Liabilities Checkable deposits S $ Bank capital million. million

Consider a bank with the following balance sheet: Assets Required reserves $10 Excess reserves $27 Loans $70 million million million Required reserves S Excess reserves Loans Liabilities Checkable deposits Bank capital Assume that required reserves are 8%. In order to avoid insolvency, regulators decide to provide the bank with $27 million in bank capital. Assume that bad news about mortgages is featured in the local newspaper, causing a bank run. As a result, $40 million in deposits is withdrawn. Show the effects of the capital injection and bank run on the balance sheet. (Round your responses to the nearest whole number.) Assets million million million $120 million - $13 million Liabilities Checkable deposits S $ Bank capital million. million

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

Consider a bank with the following balance sheet:
Assets
Required reserves $10
Excess reserves $27
Loans
$70
Required reserves
Excess reserves
Loans
million
million
million
$
$
$
Assume that required reserves are 8%. In order to avoid insolvency, regulators decide to provide the bank with $27 million in bank capital. Assume that bad news about mortgages is featured in the local newspaper, causing a bank run. As
a result, $40 million in deposits is withdrawn.
Show the effects of the capital injection and bank run on the balance sheet. (Round your responses to the nearest whole number.)
Assets
Liabilities
Checkable deposits
Bank capital
million
million
million
Liabilities
$120 million
- $13 million
Checkable deposits
Bank capital
$
$
million
million

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