For the Balance Sheet Below, Find the Level of Equity

question 73

Short Answer

For the balance sheet below, find the level of equity and the level of excess reserves. If there is a deposit outflow of $100 and the bank sells the minimum amount of bonds to meet the reserve requirement, show the new balance sheet.

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Definitions:

Probable Loss

An estimated loss from a contingent liability that is likely to occur and can be reasonably estimated.

Reasonably Possible

Describes a level of likelihood that something might occur, under consideration in areas like assessments of contingent liabilities.

U.S. GAAP

Generally Accepted Accounting Principles in the United States, a framework of accounting standards, principles, and procedures used in the compilation of financial statements.

IFRS

Stands for International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that aim to bring consistency to financial reporting around the world.