When a Bank Makes a Loan to One of Its

question 80

Multiple Choice

When a bank makes a loan to one of its customers,to the bank the loan is classified as

• A) an asset.
• B) a liability.
• C) neither an asset nor a liability.
• D) an asset in some cases and a liability in other cases,depending on the type of loan.

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Definitions:

Initial Value Method

A method used in accounting to record investments based on their acquisition costs without any subsequent change except for impairments.

Treasury Stock Approach

A method of calculating the effect of share options on diluted earnings per share by assuming treasury shares are bought at the average market price.

Long-Term Liabilities

Liabilities that are not due to be settled within the next 12 months.

Equity Method

A method of accounting in which an investor records its investment in another entity at original cost and subsequently adjusts this amount for its share of the profits or losses of the investee.