The Sea Level Bank has Gross Loans of $800 million with an ALL account of $45 million.

Question:

The Sea Level Bank has Gross Loans of $800 million with an ALL account of $45 million. Two years ago the bank made a loan for $12 million to finance the Sunset Hotel. Two million dollars in principal was repaid before the borrowers defaulted on the loan. The Loan Committee at Sea Level Bank believes the hotel will sell at auction for $7 million and they want to charge off the remainder immediately.
a. The dollar figure for Net Loans before the charge-off is _____.
b. After the charge-off, what are the dollar figures for Gross Loans, ALL and Net Loans assuming no other transactions?
c. If the Sunset Hotel sells at auction for $10 million, how will this affect the pertinent accounts?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...