Exercise 1 1) A new bank is incorporated with initial capital of £100m. 2) The bank is required by regulations to keep 10% of assets in reserves at all times. 3) The bank makes loans for what is left. 4) The bank collects £100m in checkable deposits. 5) The bank issues another £100m in equity. 6) The bank sets aside the necessary reserves and loans out the remaining funds. 7) The bank collects interest equal to 5% of the face value of all loans. 8) The bank pays 5% in interest to bondholders and 1% to depositors. 9) The bank distributes a dividend of £4m.
Exercise 1 1) A new bank is incorporated with initial capital of £100m. 2) The bank is required by regulations to keep 10% of assets in reserves at all times. 3) The bank makes loans for what is left. 4) The bank collects £100m in checkable deposits. 5) The bank issues another £100m in equity. 6) The bank sets aside the necessary reserves and loans out the remaining funds. 7) The bank collects interest equal to 5% of the face value of all loans. 8) The bank pays 5% in interest to bondholders and 1% to depositors. 9) The bank distributes a dividend of £4m.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Record the following transactions using t-accounting:
Transcribed Image Text:Exercise 1
1) A new bank is incorporated with initial capital of £100m.
2) The bank is required by regulations to keep 10% of assets in reserves at all times.
3) The bank makes loans for what is left.
4) The bank collects £100m in checkable deposits.
5) The bank issues another £100m in equity.
6) The bank sets aside the necessary reserves and loans out the remaining funds.
7) The bank collects interest equal to 5% of the face value of all loans.
8) The bank pays 5% in interest to bondholders and 1% to depositors.
9) The bank distributes a dividend of £4m.
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