Consider the Balance Sheets of Bank a and Bank B

question 18

Essay

Consider the balance sheets of Bank A and Bank B.Bank A is in Milan,Bank B is in New York.The current exchange rate is €1.00 = $1.25.Show the correct balances in each account if a currency trader employed at Bank A buys €100,000 from a currency trader at Bank B for $125,000 using its correspondent relationship with Bank B.

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Definitions:

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account columns that are equal.

Chart of Accounts

A structured list of all the financial accounts in an organization's general ledger, categorized by short and long-term liabilities, assets, revenue, and expenses.

Income Statement

A financial report that shows a company's revenues, expenses, and net income over a specific period of time.

Trial Balance

An accounting report that lists the balances of all ledgers accounts to verify that the total debits equal the total credits, used for internal purposes to check for errors.