If a Bank Has Excess Reserves of $5,000 and Demand

question 33

Multiple Choice

If a bank has excess reserves of $5,000 and demand deposit liabilities of $80,000,and if the reserve requirement is 20 percent,then the bank has actual reserves of

• A)$11,000.
• B)$20,000.
• C)$21,000.
• D)$26,000.

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Definitions:

Contra Asset Account

An account on a company's balance sheet that reduces the total amount of the company's asset accounts.

Fixed Asset Accounts

Accounts used in accounting to track the purchase, depreciation, and disposal of fixed assets, which are long-term tangible assets.

Current Ratio

A financial ratio that measures a company's ability to cover its short-term liabilities with its short-term assets, calculated as current assets divided by current liabilities.

Working Capital

The difference between a company's current assets and current liabilities, indicating the amount of liquid assets available to fund its day-to-day operations.