Assets 4. Which of the following is NOT a bank liability? The share of checkable deposits in total bank liabilities has. During November, he recorded a$270 check for the salary of a part-time employee as $27. On a bank's balance sheet, liabilities are, the difference between the value of the bank's assets and the value of its liabilities. Zeta Products Company reported the following stockholders equity on its balance sheet: 320 Heather Hasley, Drawing According to Edmund Gettier, what is the problem with the standard account of knowledge? A loan of excess reserves from one bank to another bank is recorded as a(n) ________ for the borrowing bank and a(n) ________ for the lending bank. \end{matrix} What are some other examples of liquid assets in banks? Jan. 26. In your working papers, complete the manual inventory sheet for Caroles Gift Shop. What is the largest category of bank assets? 3 Bank capital has both benefits and costs for the bank owners. purchase of securities with the agreement to sell them at a higher price at a specific future date. \text{Expenses:}\\ Banks are exposed to interest rate risk primarily because, Bank capital will decline following an increase in interest rates if the value of its, A bank that expects interest rates to fall will. TS43. \text{Treasury stock, commonat cost 201320 shares; 201210 shares } & \text{(400) } & \text{(160) }\\ Access the FASB Accounting Standards Codification at the FASB website ( asc.fasb.org ). The amount of checkable deposits that banks are required by regulation to hold are the. Granted credit to Allergy Associates for damaged merchandise,$235.00, plus sales tax, $14.10, from S455; total,$249.10. Banks seek the highest returns possible subject to minimizing risk and making adequate provisions for liquidity, The goals of bank asset management include, purchasing securities with high returns and low risk, Banks that suffered significant losses in the 1980s made the mistake of, failing to diversify their loan portfolio, A bank will want to hold more excess reserves when, brokerage commissions on selling bonds increase, As the costs associated with deposit outflows ____, the banks willingness to hold excess reserves will ____. Which of the following are reported as liabilities on a bank's balance sheet? \text{Stock No.} deposits, short-term funding, subordinated debt, bank/capital/equity, -Deposits that you can write a check against, 1) Demand Deposits - The bank must give you your funds on demand. 1. If borrowers with the most risky investment projects seek bank loans in higher proportion to those borrowers with the safest investment projects, banks are said to face the problem of, Because borrowers, once they have a loan, are more likely to invest in high-risk investment projects, banks face the. Granted credit to Tahai Industries for merchandise returned, $253.00, plus sales tax,$15.18, from S456; total, $268.18. Which of the following statements are TRUE? 4. Provisions in loan contracts that prohibit borrowers from engaging in specified risky activities are called, To reduce moral hazard problems, banks include restrictive covenants in loan contracts. & \text{6} & \text{60.00}\\ Long-term customer relationships ________ the cost of information collection and make it easier to ________ credit risks. 1 Bruce the Bank Manager can reduce interest rate risk by ________ the duration of the bank's assets to increase their rate sensitivity or, alternatively, ________ the duration of the bank's liabilities. In which of the following assets are commercial banks in the United States NOT allowed to invest checkable deposits? b. 1 When banks calculate the losses the institution would incur if an unusual combination of bad events happened, the bank is using the ________ approach. 3 Which of the following would NOT be a way to increase the return on equity? \text{4200} & \text{Party Supplies} & \text{Doz.} 2 Which of the following are NOT reported as assets on a bank's balance sheet? Received cash on account from Sierra Supply, covering S97 for $5,989.00, less 2% discount. 210 Accounts PayableBodden Company $$ 1 Unanticipated moral hazard contingencies can be reduced by, 1 A bank's commitment to provide a firm with loans up to pre-specified limit at an interest rate that is tied to a market interest rate is called, 1 Property promised to the lender as compensation if the borrower defaults is called. 1) cash - held as vault cash or on deposit. Which of the following helps explain why depositors sometimes put their funds in demand deposits rather than NOW accounts? bal.,} & \text{ } & \text{ } & \text{ }\\ Short term debt and subordinated debt is mostly issued by _____ banks, ______ _____ lending = largest asset for commercial banks, When you hear assets think _____ and ______. US treasuries, muni bonds, corporate bonds, fed funds sold, reverse repurchase agreements). \text{Total stockholders equity} & \text{7,484 } & \text{5,673 }\\ About what percentage of bank assets were loans in 2016? Which of the following would not be a way to increase the return on equity? When Best Buy translates foreign currency into U.S. dollars, what rate is used when listing the amounts for assets and liabilities? How does the use of adjustable-rate mortgages affect interest-rate risk? Examples of off-balance-sheet activities include, Banks earn profits from off-balance sheet loan sales, All of the following are examples of off-balance sheet activities that generate fee income for banks EXCEPT. If interest rates increase from 5 percent to 6 percent, the net worth of the bank falls by, Assume a bank has $200 million of assets with a duration of 2.5, and $190 million of liabilities with a duration of 1.05. \text{RATTLERS TAX SERVICES} \\ \underline{\text{Statement of Stockholders' Equity}} \\ \begin{matrix} In one sense ________ appears surprising since it means that the bank is not ________ its portfolio of loans and thus is exposing itself to more risk. & \text{5} & \text{2.75}\\ bank capital is recorded as an asset on the bank balance sheet. In recent years the interest paid on checkable and nontransaction deposits has accounted for around ________ of total bank operating expenses, while the costs involved in servicing accounts have been approximately ________ of operating expenses. Which of the following are reported as assets on a bank's balance sheet? Recorded cash and credit card sales,$8,361.60, plus sales tax, $501.70; total,$8,863.30. \text{Retained earnings} & \text{6,280} & \text{5,075}\\ If a bank has ________ rate-sensitive assets than liabilities, a ________ in interest rates will reduce bank profits, while a ________ in interest rates will raise bank profits. Examine the information below and on a separate sheet of paper write the correct amounts for the unemployment tax liabilities. 1 Of the following, which would be the last choice for a bank facing a reserve deficiency? 1 The goals of bank asset management include, 1 Banks that suffered significant losses in the 1980s made the mistake of, 1 A bank will want to hold more excess reserves (everything else equal) when. In order to reduce the ________ problem in loan markets, bankers collect information from prospective borrowers to screen out the bad credit risks from the good ones. \text{RATTLERS TAX SERVICES} \\ \underline{\text{Income Statement}} \\ \begin{matrix} $$ The company uses the number of jobs to measure activity. A bank's revenue comes from all of the following EXCEPT A) interest earned on vault cash. Which of the following is NOT covered by federal deposit insurance? As of 2016, mortgage-backed securities made up what portion of securities held by a bank? 110 Cash \text{Dec. 31} & \underline{\underline{\$ 90,000}} & \underline{\underline{\$ 33,900}} & \underline{\underline{\$ 123,900}}\\ Oct. 30. Transactions: systemically important financial institution. On January 1, Lifestyle Pools purchased 25% of Marshall Fence's common stock for $700,000 cash. Which of the following are reported as assets on a bank's balance sheet? \begin{matrix} Frank White operates a roller skating center. \text{Net income} & \text{ } & \underline{\underline{\$ 15,400}}\\ The Terminator Inc. provides on-site residential pest extermination services. The difference between a savings deposit and a time deposit is, A key difference between small-denomination and large-denomination time deposits is that. If a bank has $100,000 of checkable deposits, a required reserve ratio of 20 percent, and it holds $40,000 in reserves, then the maximum deposit outflow it can sustain without altering its balance sheet is, If a bank has $200,000 of checkable deposits, a required reserve ratio of 20 percent, and it holds $80,000 in reserves, then the maximum deposit outflow it can sustain without altering its balance sheet is, If a bank has $10 million of checkable deposits, a required reserve ratio of 10 percent, and it holds $2 million in reserves, then it will not have enough reserves to support a deposit outflow of, If a bank has excess reserves greater than the amount of a deposit outflow, the outflow will result in equal reductions in, A $5 million deposit outflow from a bank has the immediate effect of, Bankers' concerns regarding the optimal mix of excess reserves, secondary reserves, borrowings from the Fed, and borrowings from other banks to deal with deposit outflows is an example of, If, after a deposit outflow, a bank needs an additional $3 million to meet its reserve requirements, the bank can, A bank with insufficient reserves can increase its reserves by. In recent years the interest paid on checkable and time deposits has accounted for around ________ of total bank operating expenses, while the costs involved in servicing accounts have been approximately ________ of operating expenses. In order to reduce the likelihood of excessive leverage in the banking system, governments have traditionally, Limits on the value of the assets that commercial banks can acquire relative to their capital is known as, In managing its liabilities to deal with liquidity problems, banks trade off, Banks make use of the federal funds market in part to. Who would be injured? a. What is the current limit on balances that are covered by federal deposit insurance? \text{ } & \text{Stock} & \text{Earnings} & \text{S. Equity}\\ \text{Exterminating supplies} & \text{960} & \text{1.800} & \text{840 F}\\ 1 Large-denomination CDs are ________, so that like a bond they can be resold in a ________ market before they mature. CM61. 1 Bank loans from the Federal Reserve are called ________ and represent a ________ of funds. & \text{10} & \text{6.50}\\ \text{1205} & \text{Ribbon} & \text{Spool} & \text{25} & \text{.75}\\ & \text{12} & \text{2.50}\\ Bank capital is equal to ________ minus ________. Of the following, which would be the first choice for a bank facing a reserve deficiency? The duration gap for this bank is, If interest rates increase from 9 percent to 10 percent, a bank with a duration gap of 2 years would experience a decrease in its net worth of, One of the problems in conducting a duration gap analysis is that the duration gap is calculated assuming that interest rates for all maturities are the same. Which of the following is NOT an example of a backup line of credit? Which of the following are primary concerns of the bank manager? Do off-balance sheet activities ever move to the balance sheet? (time value). \text{Land} & \text{$115,000$} & \text{Common stock} & \text{$\$ 90,000$} & \text{ }\\ Because of their ____ liquidity, ____ US government securities are called secondary reserves, they can be converted into cash with low transaction costs, Banks' asset portfolios include state and local government securities because, their interest payments are tax deductible for federal income taxes, Bank's make their profits primarily by issuing, The most important category of assets on a bank's balance sheet is, Banks earn profits by selling ____ with attractive combinations of liquidity, risk, and return, and using the proceeds to buy ____ with a different set of characteristics, In general banks make profits by selling ____ liabilities and buying ____ assets, When a new depositor opens a checking account at the First National Bank, the bank's assets _____ and its liabilities ____, When Jane Brown writes a $100 check to her nephew, Ms. Brown's bank ____ assets of $100 and ____ liabilities of $100, When you deposit a $50 bill in the Security Pacific National Bank, When you deposit $50 in currency at Old National Bank, Holding all else constant, when a bank receives the funds for a deposited check, cash items in the process of collection fall by the amount of the check, When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank, then, the liabilities of Citibank increase by $10, When you deposit $50 in your account at First National Bank and a $100 check you have written on this account is cashed at Chemical Bank, then, the reserves at First National fall by $50, When $1 million is deposited at a bank, the required reserve ratio is 20%, and the bank chooses not to hold any excess reserves but makes loans instead, then, in the bank's final balance sheet, the liabilities of the bank increase by $1 million, When $1 million is deposited at a bank, the required reserve ratio is 20% and the bank chooses not to make any loans but to hold excess reserves instead, then, in the bank's final balance sheet, the assets at the bank increase by $1 million, With a 10% reserve requirement ratio, a $100 deposit into New Bank means that the maximum amount New Bank could lend is. A loan of excess reserves from one bank to another bank is recorded as a(n) ________ for the borrowing bank and a(n) ________ for the lending bank. From the standpoint of ____, specialization in lending is surprising but makes perfect sense when one considers the ____ problem, Provisions in loan contracts that prohibit borrowers from engaging in specified risky activities are called, To reduce moral hazard problems, banks include restrictive covenants in loan contracts. How to calculate maturity value of a notes receivable? This situation is an example of which problem banks face in lending? Bank capital is listed on the ____ side of the bank's balance sheet because it represents a ____ of funds, The fraction of checkable deposits that banks are required by regulation to hold are. From the standpoint of ________, specialization in lending is surprising but makes perfect sense when one considers the ________ problem. When posting column totals from the cash receipts journal to the general ledger, which total is not posted? Which of the following are reported as liabilities on a bank's balance sheet? \text{Expenses:} & \text{ } & \text{ }\\ Your clients explanation is that FIFO is consistent with the method used by some other companies in the industry. Received notice from the bank of a dishonored check from Ralston Eubanks, $125.00, plus$30.00 fee; total, $155.00. In order to reduce the ____ problem in loan markets, bankers collect information from prospective borrowers to screen out the bad credit risks from the good ones. Purchased supplies, $54.00, using a debit card. The way stock dividends or stock splits in the current year affect the presentation of EPS in the income statement. What caused Zetas preferred stock to decrease during 2013? Christine is looking at the financial reports for each of the company's product lines to determine which product lines should be marketed more heavily in the future. Which asset is sometimes referred to as a bank's secondary reserves? Paid cash on account to Reed Rosman,$289.00, using EFT. Which of the following are not reported as assets on a bank's balance sheet? \text{2013 and 20124 and 8 shares, respectively} & \text{\$ 4} & \text{\$ 8}\\ Initial measurement of stock options. The company has several mobile teams who are dispatched from a central location in company-owned trucks. 2 Because of their ________ liquidity, ________ U.S. government securities are called secondary reserves. Which of the following are transaction deposits? 140 Prepaid Insurance \text{1900} & \text{Balloons} & \text{Doz.} 1 All of the following are nontransaction deposits EXCEPT. & \text{Item} & \text{Unit} & \text{Quantity} & \text{Unit Cost}\\ \hline Which of the following involves banks borrowing funds from firms or other banks using the value of underlying securities as collateral? Which of the following is not a source of borrowings for a bank? Heather Hasley owns a service business that uses the following accounts. 1 ________ may antagonize customers and thus can be a very costly way of acquiring funds to meet an unexpected deposit outflow. All of the following are examples of borrowings by a bank EXCEPT. This approach is known as the. The difference between a demand deposit and a NOW account is that. What are some examples of off-balance sheet activities? An investment maturity strategy which calls for a bank to put all of its investment assets into very long-term securities is called the: Product A's annual inventory turnover rate is 10 and product B's annual turnover rate is 15. 2. used for savings & generating interest income, -Passbook Savings Account: write in an actual book and say how much you deposit into the account (now done electronically). \text{Insurance} & \text{$5,800$} & \text{ }\\ Which of the following statements most accurately describes the task of banks asset management? $$ 1 Banks acquire the funds that they use to purchase income-earning assets from such sources as. $$ \text{Advertising} & \text{800} & \text{800} & \text{0}\\ Enter the following transactions on page 8 of the journal. What average price per share did Zeta pay for the treasury stock that the company purchased during the year? Prepare a post-closing trial balance. The formula to calculate diluted earnings per share. Owners Equity Which of the following is not a source of borrowings for a bank? What were the mathematical expressions that Galileo derived for acceleration, speed, and distance covered by a falling object in a certain time t? $$ \end{matrix} On a bank's balance sheet, liabilities are. On a bank's balance sheet, total assets are equal to, If a bank's total assets = $3,500 billion, its total liabilities = $3,200 billion, and its bank capital = $300 billion, its bank capital as a percentage of assets is approximately, In banking, the spread refers to the difference between the, When a bank issues a checkable deposit and loans the funds out to a business, it has transformed, If you have a checking account at First National Bank, the account is, If you deposit a $50 check in the bank, the immediate impact on your bank's balance sheet will be a, If you deposit $300 in your bank and the required reserve ratio is 10%, your bank will have. 2 Which of the following bank assets is the most liquid? Received cash on account from Oakley Company, $371.00, covering S96. \text{Net income} & \text{ } & \text{$15,400$} & \text{$15,400$}\\ What is the most conservative (most dilutive scenario) way to treat options and warrants when calculating fully diluted shares outstanding? About what percentage of bank assets was made up of cash items in 2016? 2 Which of the following are reported as assets on a bank's balance sheet? For a given return on assets, the lower its bank capital, the higher is the return for the owners of the bank. When a company does business in a foreign country, it often deals in the currency of that country. On a bank's balance sheet, bank capital is considered, Businesses hold substantial balances in demand deposits for all of the following reasons EXCEPT. 2. 1 Which of the following are transaction deposits? Because checking accounts are ________ liquid for the depositor than savings accounts, they earn ________ interest rates.