Here again is the balance sheet information for Cipher Bank. It will be repeated

Question

Here again is the balance sheet information for Cipher Bank. It will be repeated in future questions to make things a bit easier. Note that you can, and may have to, calculate anything marked with a "???," and anything not included or otherwise calculable-$0. Assets Liabilities and Owner's Equity uildings and furniture $900Checking deposits $2100 Cash $80 Commercial paper $500 Deposit in the Fed $320 Government agency bonds $800 Home mortgages $1200 Loan to Bank A $400 Loans to firms $1100 Loans to households $1300 Municipal bonds $1400 US government bonds $600 Savings deposits $800 Time deposits $200 Borrowing from Bank B $500 Borrowing from the Fed $1600 Other liabilities $1000 Equity $??? Total assets $8600 Total liabilities and owner's equity ???

Explanation / Answer

Step 1: Calculate value of Equity

The value of equity is arrived as follows:

Equity = Total Assets - Checking Deposits - Savings Deposits - Time Deposits - Borrowing from Bank - Borrowing from the Fed - Other Liabilities

Substituting values in the above formula, we get,

Equity = 8,600 - 2,100 - 800 - 200 - 500 - 1,600 - 1,000 = $2,400

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Step 2: Calculate Total of Bank's Liabilities and Owner's Equity

The total of bank's liabilities and owner's equity is calculated as follows:

Total of Bank's Liabilities and Owner's Equity = Checking Deposits + Savings Deposits + Time Deposits + Borrowing from Bank + Borrowing from the Fed + Other Liabilities + Equity = 2,100 + 800 + 200 + 500 + 1,600 + 1,000 + 2,400 = $8,600 (which is same as value of Total Assets)

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