The balance sheet for the newly formed ACME Bank is shown below ACME Bank Balanc

Question

The balance sheet for the newly formed ACME Bank is shown below ACME Bank Balance Sheet 1 Liabilities and net worth S 110,000 Checkable 3 106,000 S 251,000 Stock sharesS 255,000 Reserves deposits Property Instructions: Enter your answers as whole numbers a. Toshl, the owner of Toshi's Produce, negotilates with the bank to obtain the loan is added to the available balance of Toshi's checking account Fill in the new values that will appear in the balance sheet immediately after the loan is finalized a $36.000 loan to buy a new delivery truck. The amount of ACME Bank Balance Sheet 2 Liabilitios and net worth Assets Reserves Loans deposits Stock shares

Explanation / Answer

a. After the loan has been finalized, the immediate impact is that the loans will increase by $36,000 but no amount will reduce from reserves till Toshi actually usese this amount this amount of loan, so the bank will increase the loans by $36,000 and added this amount in the Toshi's checking account ( His account is in ACMe bank) so the checkable deposits of the bank ACME will also increase by $36,000.

b) After Toshi writes a check from his checking account to purchase the delivery truck from Bob's Motors.

The Bob's Motors have its account in some other bank so now the checkable deposit will reduce by $36,000 as Toshi writes check or he now finally uses this loan amount and now the reserves will reduce by $36,000 because loan is always made from the excess reserves if ACME is ready to loan the amount of $36,000 it means it have an excess reserve of $36,000.

New balance sheet will be

c) If the reserve requirement is 12% , so the bank must have to keep a reserves of 12% of $106,000

it means the 12% of checkable deposits is the required reserves.

Required reserves = $106,000 * 12/ 100 = $12,720

So the excess reserves = Total reserves - required reserves

Excess reserves = $74,000 - $12,720 = $61,280.

So ACME bank can provide additional loan to its other customers of $61,280

ACME Bank Balance Sheet 2 Assets Amount ($) Liabilities and net worth Amount ($) Reserves 110,000 Checkable deposits 142,000 Loans 36,000 Stock shares 255,000 Property 251,000

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