Keele Bank has the following items on its balance sheet (expressed in $billion). ESF 2 Accumulated retained
Question:
Keele Bank has the following items on its balance sheet (expressed in $billion).
ESF | 2 |
Accumulated retained profit | 54 |
Term Deposits of customers | 630 |
Loans to households | 500 |
Capital notes on issue | 4 |
Demand deposits of customers | 128 |
Shares on issue | 16 |
Provisions for bad and doubtful debt | 10 |
Loans to businesses | 300 |
Capital Reserve | 10 |
Government securities (trading) | 30 |
Government securities (available for sale) | 20 |
(a) Build Keele Bank’s balance sheet incorporating all the above items and calculate Keele Bank’s equity.
(b) Using one new balance sheet (separate from the one in a), represent the effect of the following operations on the balance sheet of the bank described in question (a). [Only represent variations, not new levels. ]
(i) The market value of the government bonds held by Keele Bank for trading purposes increases by $3 billion.
(ii) The market value of the government bonds held by Keele Bank for liquidity purposes increases by $2 billion.
(iii) Keele Bank writes off $15 billion of loans made to households.
(iv) Keele Bank makes $1 billion new loans to businesses that have an account in the bank.
(v) Keele Bank buys new furniture for $0.2 billion from a company that is not a customer of the bank.
Introduction to Financial Accounting
ISBN: 978-0133251036
11th edition
Authors: Charles Horngren, Gary Sundem, John Elliott, Donna Philbrick