The bank has loan-loss reserves of $10 million. The real estate and commercial loans shown on the balance sheet are net of the loan-loss reserves. a. Calculate the equity capital ratio. How could the bank increase its equity capital ratio? b. Risk-adjusted assets are estimated using the following weightings process: cash and government securities =.00; real estate loans =.50; commercial and other loans = 1.00. […]

The prime rate, and other interest rates, offered by banks often change in the same direction as a change in the Fed”s target for the federal funds rate. As an employee of a Federal Reserve District Bank you have been told that your District Bank will be increasing its discount rate early next week. Expectations are that an increase in the discount rate will lead […]

Challenge Problem You have been asked to assess the impact of possible changes in reserve requirement components on the dollar amount of reserves required. Assume the reserve percentages are set at 2 percent on the first $50 million of traction account amounts, 4 percent on the second $50 million, and 10 percent on transaction amounts over $100 million. First National Bank has transaction account balances […]

Stephen Wadson and Mary Shively, two professionals in the finance area, have worked for Morrisen Leasing for a number of years. Morrisen Leasing is a company that leases high-tech medical equipment to hospitals. Stephen and Mary have decided that, with their financial expertise, they might start their own company to perform consulting services for individuals interested in leasing equipment. One form of organization they are […]

Alexandra and Kellie operate a beauty salon as partners who share profits and losses equally. The success of their business has exceeded their expectations; the salon is operating quite profitably. Kellie is anxious to maximize profits and schedules appointments from 8 a.m. to 6 p.m. daily, even sacrificing some lunch hours to accommodate regular customers. Alexandra schedules her appointments from 9 a.m. to 5 p.m. […]

As this chapter indicates, the partnership form of organization has advantages and disadvantages. The chapter noted that different types of partnerships have been developed to minimize some of these disadvantages. Alternatively, an individual or company can choose the proprietorship or corporate form of organization. Instructions Go to two local businesses that are different, such as a restaurant, a retailer, a construction company, or a professional […]

Indicate whether each of the following statements is true or false. Similar to partners in a partnership, stockholders of a corporation have unlimited liability. It is relatively easy for a corporation to obtain capital through the issuance of stock. The separation of ownership and management is an advantage of the corporate form of business. The journal entry to record the authorization of capital stock includes […]

Santa Anita Inc. purchases 3,000 shares of its $50 par value common stock for $180,000 cash on July 1. It will hold the shares in the treasury until resold. On November 1, the corporation sells 1,000 shares of treasury stock for cash at $70 per share. Journalize the treasury stock transactions. Record the purchase of treasury stock at cost. When treasury stock is sold above […]

Jennifer Corporation has issued 300,000 shares of $3 par value common stock. It authorized 600,000 shares. The paid-in capital in excess of par on the common stock is $380,000. The corporation has reacquired 15,000 shares at a cost of $50,000 and is currently holding those shares. Treasury stock was reissued in prior years for $72,000 more than its cost. The corporation also has 4,000 shares […]

Making the election to report a child”s interest and dividends on the parent”s return (using Form 8814) can be favorable to the parent with respect to: a. Incorrect. The election increases the parent”s AGI, which can limit the deduction for student loan interest. b. Correct. The election increases the parent”s AGI, which can mean taxpayers who make large charitable contributions that were limited by the […]