Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 6, Problem 16PC
To determine
Explain the proper treatment for each of the proposed arrangement from the viewpoint of the auditor, and discuss the person with respect to the Country U.S GAAP in deciding whether the transaction will result in a liability to be recorded or whether note disclosure will be sufficient. Identify whether Country U.S GAAP reporting result in a precise portrayal of the economics of the arrangement in every case.
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Wyatt Widgets has an expected cash flow of $4,500,000 and the standard deviation of the cash
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1. A bank has deposits of 100 billion and leverage ratio of 12. Assume that it has a reserve ratio of 20 percent, and it holds no excess reserves. Further suppose that bank capital is $36 billion. Lump all assets besides ‘reserves’ into a category labeled ‘other’.a) Write down a t-account for the bank. Briefly explain how you come up with any number.b) Suppose the new legislation requires banks to have a reserve ratio of at least 30 percent. The bank meets this requirement by issuing new debt. There is no change in the amount of deposits. Show the new t-account. What is the new leverage ratio?
(Please answer the entire question)
Consider a bank with the following balance
sheet:
Assets Liabilities
Required$10
millionCheckable$120million
deposits
millionBank
capital
reserves
Excess $19
million
$16
reserves
Loans $75
Assume that required reserves are 8%. In
order to avoid insolvency, regulators decide to
provide the bank with $26 million in bank
capital. Assume that bad news about
mortgages is featured in the local newspaper,
causing a bank run. As a result, $25 million in
deposits is withdrawn.
Assets
million
Liabilities
millionCheckable$95million
deposits
millionBank
сapital
Required $8
reserves
Excess $22
$10million
reserves
$75
million
1) The bank now has a capital ratio of
and the bank is
a) 9.5%; well-capitalized
b) 5.9%; well-capitalized
c) 9.5%; in a dire capital position
d) 5.9%; in a dire capital position
Loans
Chapter 6 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
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