$$\begin{array}{l}
\text { Table: Bank Balance Sheet }\
\begin{array} { l r l r }
\hline \text { Assets } & & { \text { Liabilities \& Net Worth } } \
\hline \text { Reserves } & \$ 10,000 & \text { Deposits } & \$ 100,000 \
\text { Loans } & 100,000 & \text { Debt } & 20,000 \
\text { Securities } & 40,000 & \text { Equity } & 30,000
\end{array}
\end{array}$$ Reference: Ref 19-1

(Table: Bank Balance Sheet) Based on the table, owners' equity will fall to zero if loan defaults reduce the value of total assets by percent.
A)10
B)20
C)30
D)40

Question

$$\begin{array}{l}
\text { Table: Bank Balance Sheet }\
\begin{array} { l r l r } 
\hline \text { Assets } & & { \text { Liabilities \& Net Worth } } \
\hline \text { Reserves } & \$ 10,000 & \text { Deposits } & \$ 100,000 \
\text { Loans } & 100,000 & \text { Debt } & 20,000 \
\text { Securities } & 40,000 & \text { Equity } & 30,000
\end{array}
\end{array}$$ Reference: Ref 19-1
 
(Table: Bank Balance Sheet) Based on the table, owners' equity will fall to zero if loan defaults reduce the value of total assets by percent.
A)10
B)20
C)30
D)40

Quizplus · Accepted Answer

The total assets are $150,000. A 20% reduction in assets ($30,000) would reduce the assets to $120,000, which equals the liabilities ($100,000 deposits + $20,000 debt), leaving equity at zero.

Reference: Ref 19-1 &Nbsp; (Table: Bank Balance Sheet) Based on l

Reference: Ref 19-1
&Nbsp;
(Table: Bank Balance Sheet) Based on l