If a Bank Has 1,000 Depositors, Each of Whom Deposits

question 45

Multiple Choice

If a bank has 1,000 depositors, each of whom deposits $1,000 in the bank, and the bank makes loans of $10,000 each, then each depositor has contributed:

• A) $100 to each loan.
• B) $1 to each loan.
• C) $10 to each loan.
• D) $1000 to each loan.

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Definitions:

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, decay, or decline in value over time.

Salvage Value

The estimated resale value of an asset at the end of its useful life, used in calculating depreciation expenses.

Half-Year Convention

A tax and accounting method that treats all assets acquired or disposed of during a year as being acquired or disposed at the midpoint of that year.

Sum-Of-The-Years'-Digits

An accelerated depreciation method that applies a decreasing fraction to the depreciable cost of an asset over its useful life.