Answer the question based on the following balance sheet for the First National Bank. Assume the reserve ratio is 15 percent: Refer to the data above. If a check for $14,000 is drawn and cleared against this bank, then its reserves and checkable deposits will be, respectively:
A) $50,000 and $120,000
B) $50,000 and $106,000
C) $36,000 and $120,000
D) $36,000 and $106,000

Question

Answer the question based on the following balance sheet for the First National Bank. Assume the reserve ratio is 15 percent:  Refer to the data above. If a check for $14,000 is drawn and cleared against this bank, then its reserves and checkable deposits will be, respectively:
A) $50,000 and $120,000 
B) $50,000 and $106,000 
C) $36,000 and $120,000 
D) $36,000 and $106,000

Quizplus · Accepted Answer

Since the reserve ratio is 15%, the bank is required to hold 15% of its checkable deposits as reserves. Thus, the required reserve amount is 0.15 x $106,000 = $15,900. When the check for $14,000 clears, the bank's reserves will decrease to $36,100 ($50,000 - $14,000 - $15,900). The checkable deposits will also decrease to $106,000 - $14,000 = $92,000. Therefore, the correct answer is D.

Answer the Question Based on the Following Balance Sheet for the First