Answer:
the acid-test ratio is 0.75 times
Explanation:
The computation of the acid-test ratio is shown below:
We know that
Acid-test ratio is
= Quick assets ÷ current liabilities
= $6,123,000 ÷ $8,144,000
= 0.75 times
Hence, the acid-test ratio is 0.75 times
basically we divided the quick assets from the current liabilities so that the acid-test ratio could come
A partnership has the following account balances at the date of termination: Cash, $93,000; Noncash Assets, $725,000; Liabilities, $363,000; Bell, capital (50 percent of profits and losses), $215,000; Mann, capital (30 percent), $150,000; Scott, capital (20 percent), $90,000. The following transactions occur during liquidation: Noncash assets with a book value of $565,000 are sold for $465,000 in cash. A creditor reduces his claim against the partnership from $120,000 to $100,000, and this amount is paid in cash. The remaining noncash assets are sold for $130,000 in cash. The remaining liabilities of $243,000 are paid in full. Liquidation expenses of $21,000 are paid in cash. Cash remaining after the above transactions have occurred is distributed to the partners. Prepare a statement of partnership liquidation to determine how much cash each partner receives from the liquidation of the partnership. (Amounts to be deducted should be entered with a minus sign.)
Answer:
Bell, Mann, and Scott Partnership
Statement of Partnership Liquidation
Bell Mann Scott Total
Capital account balances $215,000 $150,000 $90,000 $455,000
Share of net loss (55,000) (33,000) (22,000) (110,000)
Capital account balances $160,000 $117,000 $68,000 345,000
Cash payment -160,000 -117,000 -68,000 -345,000
Ending balance $0 $0 $0 $0
Explanation:
a) Data and Calculations:
Assets:
Cash, $93,000
Non-cash Assets, $725,000
Total assets $818,000
Liabilities, $363,000
Bell, capital $215,000
Mann, capital $150,000
Scott, capital $90,000
Total liabilities and owners capital $818,000
Profit and Loss Sharing Ratios:
Bell = 50%
Mann = 30%
Scott = 20%
Loss arising from the sale of non-cash assets and liabilities:
Book Value Cash Collected/Paid Loss/Gain
$565,000 $465,000 -$100,000
$160,000 $130,000 -$30,000
Gain from adjustment of liabilities:
$120,000 $100,000 $20,000
Net Loss to be shared among partners $110,000
Cash account
Balance $93,000
Non-assets 465,000
Non-assets 130,000 595,000
Liabilities (100,000)
Liabilities (243,000) (344,000)
Distributable balance $345,000
g If a stock consistently goes down (up) by 1.31% when the market portfolio goes down (up) by 1.05%, then its beta equals:
Answer:
1.25
Explanation:
The stock consistently goes down by 1.31%
The market portfolio goes up by 1.05%
The beta can be calculated as follows
1.31/1.05
= 1.25
Hence the beta is 1.25
You have $20,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14.3 percent and Stock Y with an expected return of 8.1 percent. Your goal is to create a portfolio with an expected return of 12.5 percent. All money must be invested. How much will you invest in Stock X
Answer:
$14,194
Explanation:
Wy + Wx = 1
Wy*Ry + Wx*Rx = 12.5%
So, let input the values
Wy*8.1% + (1-Wy)*14.3% = 12.5%
Wy*8.1% + 14.3%-14.3%*Wy = 12.5%
14.3%*Wy - Wy*8.1% = 1.8%
Wy*6.2% = 1.8%
Wy = 0.2903
Weight of X in portfolio = 1 - 0.2903
Weight of X in portfolio = 0.7097
Money invested in stock X = $20,000*0.7097
Money invested in stock X = $14,194
The chairperson can also be a minute taker in the meeting ?
Todd Silver is the purchasing agent for Moore Co. One of his suppliers, Gem Co. offers Todd a free vacation to France if he buys at least 75% of Moore's supplies from Gem Co. Todd, who was angry because Moore Co. has not given him a raise in over a year, is considering the offer. Write your recommendation to Todd.
Answer:
Ethically the offer made by Gem Co. is not suitable because Todd will buy 75% of the Moore Co. supplies from Gem Co. which could be of low quality and or expensive because if Todd accepts the offer Gem Co. would know that Todd will purchase 75% of supplies from Gem Co. and not from any other supplier so the quality and cost can be varied easily and no complaint will be made by Todd, but this can cause Todd to lose his job at Moore Co. and ethically breaching his duties of professional behavior and due care.
Explanation:
Ethically the offer made by Gem Co. is not suitable because Todd will buy 75% of the Moore Co. supplies from Gem Co. which could be of low quality and or expensive because if Todd accepts the offer Gem Co. would know that Todd will purchase 75% of supplies from Gem Co. and not from any other supplier so the quality and cost can be varied easily and no complaint will be made by Todd, but this can cause Todd to lose his job at Moore Co. and ethically breaching his duties of professional behavior and due care.
Carla Vista Company purchases Sandhill Company for $2470000 cash on January 1, 2021. The book value of Sandhill Company’s net assets, as reflected on its December 31, 2020 balance sheet is $1923000. An analysis by Carla Vista on December 31, 2020 indicates that the fair value of Sandhill’s tangible assets exceeded the book value by $190500, and the fair value of identifiable intangible assets exceeded book value by $142500. How much goodwill should be recognized by Carla Vista Company when recording the purchase of Sandhill Company?
Answer: $214000
Explanation:
The amount of goodwill that should be recognized by Carla Vista Company when recording the purchase of Sandhill Company will go thus:
Book value of net assets = $1923000
Add: Excess fair value of tangible asset = $190500
Add: Excess fair value of intangible assets = $142500
Fair value of net assets = $1923000 + $190500 + $142500 = $2256000
Therefore, Goodwill will be:
=Cash paid for purchase - Fair value of net assets
= $2470000 - $2256000
= $214000
In a Harvard print journal and ejournal article references for a reference list, which elements, if any, are placed in round brackets?
Author and journal title.
Author and issue number.
Year of publication and issue number, if there is one.
Article title and year of publication.
Answer: Year of publication and issue number, if there is one.
Explanation:
There are quite a number of referencing style conventions available in the world today with some of the most prominent being the APA style, MLA and the Chicago style.
Harvard has its own referencing style that may not be as popular as the above but is very well known nonetheless. When referencing using the Harvard style and the year of publication and issue number needs to be included in a print or e-journal reference, it is to be placed in a round bracket. If there isn't any then there is no need.
You are buying your first car and need to borrow $16,000 over 5 years. If interest is 6%, what are your monthly payments
Answer: $309.32
Explanation:
The amount that you are to find is an annuity figure because it will be a constant payment. The present value of this annuity is $16,000.
As it is pad monthly, convert time and rate to monthly figures:
5 years = 5 * 12 = 60 months
6% = 6/12 = 0.5%
Present value of annuity = Annuity * ( 1 - (1 + r) ^ -n) / r
16,000 = Annuity * ( 1 - (1 + 0.5%)⁻⁶⁰) / 0.5%
16,000 = Annuity * 51.72556
Annuity = 16,000 / 51.72556
= $309.32
In 1 to 2 paragraphs, analyze how a person's ethics or values might affect his performance on the job
Answer:
In simple words, Individual workers' ethical convictions have an impact on team and department productivity as well as individual achievement. Being an ethical worker allows you to be a stronger team participant constantly contributing positively in group situations and just never impeding collective success.
Even though all individuals are important in and of themselves, ethical individuals can be more monetarily useful to their companies as well as more respected by their colleagues and competitors. Reflecting on workplace ethics may help you become a better employee, and it's a good thing to begin if you want to do the right thing all of the time.
Answer:
How can poor ethics devalue you as an asset on the team? Well, if you have poor moral standards and beliefs and what not, people can somewhat easily identify your personality as a negative trait. However if you're a good person with good values and spot on ethics, people will quickly realize that you're a good asset to have on the team.
Your energy, work ethic, and values also determine how good or bad your work ethic is.
Explanation:
For Connections Academy Career Development Unit Test
The reason for failure of quality improvement efforts ismanagers continue to focus on short-term financial results.managers instinctively blame employees when there is a quality failure.managers interfere with teamwork.all of the above.
Answer:
managers instinctively blame employees when there is a quality failure, managers continue to focus on short-term financial results,and managers interfere with teamwork
Explanation:
Quality improvement can be regarded as systematic as well as formal approach used in analysis of practice performance as well as efforts used in improving performance. variety of this approaches such as
QI models enables one in collections and analysis of data and test change.
It should be noted that The reason for failure of quality improvement efforts is
that;
1)managers instinctively blame employees when there is a quality failure,
2) managers continue to focus on short-term financial results,
3)managers interfere with teamwork
At the end of May, the following adjustment data were assembled.
a. Insurance expired during May is $275.
b. Supplies on hand on May 31 are $715.
c. Depreciation of office equipment for May is $330.
d. Accrued receptionist salary on May 31 is $325.
e. Rent expired during May is $1,600.
f. Unearned fees on May 31 are $3,210.
Required:
Journalize the adjusting entries.
Answer and Explanation:
The adjusting entries are as follows:
a. Insurance expense $275
To Prepaid insurance $275
(To record the insurance expense)
b. Supplies expense $785 ($1,500 - $715)
To Supplies $785
(To record the supplies expense)
We assume the balance of supplies before adjustment is $1,500
c. Depreciation - office equipment $330
To Accumulated depreciation $330
( To record the depreciation expense)
d. Salary Dr $325
To Accrued salary $325
(To record the accrued salary)
e. Rent expense $1,600
To Prepaid rent $1,600
(To record the rent expense )
f. Unearned fees $790
To Fees revenue $790
(To record the unearned fees is recorded)
We assume the balance of unearned fees before adjustment is $4,000
Therefore, $790 is arrive from
= $4,000 - $3,210
= $790
Tamarisk, Inc. purchased a delivery truck for $29,200 on January 1, 2020. The truck has an expected salvage value of $2,200, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 16,100 in 2020 and 12,800 in 2021.
Required:
Compute depreciation expense for 2020 and 2021 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method.
Answer:
1. $3375
$3375
2. $4347
$3456
3 $7300
$5475
Explanation:
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
( $29,200 - $2,200,) / 8 = $3375
depreciation expense each year is $3375
Depreciation expense using the double declining method = Depreciation factor x cost of the asset
Depreciation factor = 2 x (1/useful life) = 2/8 = 0.25
2020 = 0.25 x 29200 = 7300
2021 = 0.25x( 29200 - 7300)
Activity method based on output = (output produced that year / total output of the machine) x (Cost of asset - Salvage value)
What is a certificate of deposit (CD)?
A. A savings product with a guaranteed rate of interest and a maturity date.
B. Written document that proves ownership in a company or a small business.
C. A receipt for buying a mutual fund.
D. A bond with yearly dividends.
Answer:
i believe the answer is b
Jeff purchased $550 of goods and received credit terms of 5/15, n/30. How much did he pay if payment was made during the discount period? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
Answer:
$522
Explanation:
Calculation to determine How much did he pay if payment was made during the discount period
Amount paid =$550-(5%*$550)
Amount paid=$550-$28
Amount paid=$522
Therefore the amount he will he pay if payment was made during the discount period is $522
As in any crisis, opportunities develop. Name three firms that have maximized their competitive advantage during this time. Name three who have failed. Explain both the success and failures of these firms.
Answer:
Firms that maximized their competitive advantage:
Pfizer
Amazon
Netflix
Firms who failed during Coviid crisis:
LasVegas Monorail
Bounce for fun - New York
Gold's Gym International
Explanation:
The world is going through very tough period. Its been more than a year that there have been complete lockdown in many countries. COVIiD - 19 virus has created great challenges for humans to survive. It has also impacted businesses and financial sectors. Some businesses were able to boost their sales and they exploit the pandemic while some companies were struggling to avoid bankruptcy and shutdowns. Pfizer has turned this pandemic into an opportunity to boost their business sales by introducing vaccine against this virus. While on the other hand some businesses were moved towards bankruptcy as there is closure for more than a year due to social distancing.
A liquidity trap is a situation in which: _________
a. using expansionary monetary policy is not effective because, the nominal interest rate is almost zero.
b. lenders are trapped by large loans with declining rates of return. using expansionary monetary policy is not effective, because the real interest rate is negative.
c. aggregate demand falls, because consumers do not have enough liquidity to consume.
d. using expansionary fiscal policy is not effective because, the budget is in a deficit.
In monetary policy, reference to a zero bound on interest rates means that the central bank can no longer reduce the interest rate to encourage economic growth. As the interest rate approached the zero bound, the effectiveness of monetary policy as a tool was assumed to be reduced.
If a company reports profit margin of 32.3% and investment turnover of 1.30 for one of its investment centers, the return on investment must be:
Answer:
42%
Explanation:
Calculation to determine what the return on investment must be:
Using this formula
Return on investment=Profit margin*Investment turnover
Let plug in the formula
Return on investment=32.3%*1.30
Return on investment=0.4199*100
Return on investment=41.9%
Return on investment=42% (Approximately)
Therefore the return on investment must be:42%
The balance in the prepaid insurance account, before adjustment at the end of the year, is $18,630. The year end is March 31.
Journalize the March 31 adjusting entry required under each of the following alternatives for determining the amount of the adjustment: (a) the amount of insurance expired during the year is $15,300; (b) the amount of unexpired insurance applicable to future periods is $3,330. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTS
General Ledger
ASSETS
11 Cash
12 Accounts Receivable
13 Supplies
14 Prepaid Insurance
15 Land
16 Equipment
17 Accumulated Depreciation-Equipment
19 Accumulated Depreciation-Automobiles
LIABILITIES
21 Accounts Payable
22 Unearned Fees
23 Salaries Payable
24 Taxes Payable
EQUITY
31 John Doe, Capital
32 John Doe, Drawing
REVENUE
41 Fees Earned
EXPENSES
51 Advertising Expense
52 Insurance Expense
53 Rent Expense
54 Salary Expense
55 Supplies Expense
56 Utilities Expense
57 Depreciation Expense
59 Miscellaneous Expense
Journalize the March 31 adjusting entry required when the amount of unexpired insurance applicable to future periods is $8,750. Refer to the Chart of Accounts for exact wording of account titles.
Answer:
A. Dr Insurance Expense $15,300.00
Cr Prepaid Insurance 115,300.00
B. Dr Insurance Expense $15,300.00
Cr Prepaid Insurance 115,300.00
C. Dr Insurance Expense $9,880.00
Cr Prepaid Insurance $9,880.00
Explanation:
A. Preparation of the March 31 adjusting entry required when the amount of insurance expired during the year is $15,300
Dr Insurance Expense $15,300.00
Cr Prepaid Insurance 115,300.00
B. Preparation of the March 31 adjusting entry required when the amount of unexpired insurance applicable to future periods is $3,330
Dr Insurance Expense $15,300.00
Cr Prepaid Insurance $5,300.00
($18,630-$3,330)
C.Preparation of the March 31 adjusting entry required when the amount of unexpired insurance applicable to future periods is $8,750
Dr Insurance Expense $9,880.00
Cr Prepaid Insurance $9,880.00
($18,630-$8,750)
1. An increase in the interest rate makes all households worse off.
a. True
b. False
2. If a household is neither borrowing nor lending, any change in the interest rate makes them better off.
a. True
b. False
3. The difference between the price of a nominal bond paying off $1 in nominal terms tomorrow and the price of a real bond paying off $1 in real terms tomorrow is the price level.
a. True
b. False
Answer:
el primero es true el segundo creo que es falso y el terserro es true una disculpa si sacas. mal tu calificación por qué casi no se me da eso aunque alguna dicen que es fácil ansori
Micro, Inc., started the year with net fixed assets of $74,675. At the end of the year, there was $95,825 in the same account, and the company's income statement showed depreciation expense of $12,795 for the year. What was the company's net capital spending for the year
Answer:
$33,945
Explanation:
Calculation to determine What was the company's net capital spending for the year
Using this formula
Net capital spending=Ending net fixed assets-Beginning net fixed assets +Depreciation expense
Let plug in the formula
Net capital spending = $95,825 − $74,675 + $12,795
Net capital spending =$33,945
Therefore the company's net capital spending for the year is $33,945
A net worth statement is also called which of the following? A) personal liabilities sheet b) personal estate list c) personal assets list d) personal financial statement
The Get Well Health Care Company directors noticed a significant drop in the company’s customer service ratings. It was determined that an Agile Lean approach to improving the methods for receiving, processing, and resolving customer questions and complaints as needed. The CEO of the company is anxious to get the effort underway. You have been appointed to lead this effort. You are told by the CEO when she appoints you that the employees of the customer service unit are unaware of the change that is to occur, nor are they aware of the drop in the customer service ratings. You decide to use the ADKAR Model to assist the employees in this unit address the change.
In this assignment, you are to list and explain each step of the ADKAR Model. You are to then describe what action(s) you would take under each of these steps to help the employees of the customer service unit navigate this change.
Answer:
ADKAR is
A : is the awareness to need a change
D : is the desire to change
K : is the knowledge of how to change
A : is the ability to change
R : is the reinforcement to change
Explanation:
In order to improve methods of customer service a change is required in the Get Well Health Care Company and I will be using ADKAR model to implement this change.
ADKAR is
A : is the awareness to need a change
D : is the desire to change
K : is the knowledge of how to change
A : is the ability to change
R : is the reinforcement to change
Firstly the change is required in Get Well Heath Care Company because there is a significant drop in customer service ratings which will make the company lose business.The change is desired because the company and its employees wants to continue to provide better health care to its customers.The employees needs to understand how to satisfy the customer with their service to get a better customer service rating.Are the employees able to implement this change? are they enough motivated to provide a better customer service?Are the employees going to reinforce the change implemented or will they go back to their old practices of customer service?According to the U.S. Bureau of Labor Statistics, there were 100,200 chefs/head cooks employed in the United States in 2010 and 320,800 food service managers. Those numbers were projected to decrease to 99,200 and 317,000 by 2020. Which job was facing the larger percent decrease
Answer:
food service managers
Explanation:
Percentage decrease = change in labour employed / initial labour employed x 100
chefs =
change in labour employed = 99,200 - 100,200 = -1000
-1000/100,200 x 100 = -0.998%
-0.1
1.18
Within Year, Inc. has bonds outstanding with a $1,000 par value and a maturity of 39 years. The bonds have an annual coupon rate of 8.0% with semi-annual coupon payments. You would expect a quoted annual return of 9.0% if you purchased these bonds. What are the bonds worth to you
Answer:
$892.48
Explanation:
Time = 39 years*2 = 78 periods
Coupon rate = 8%/2 = 4%
Coupon payment = 0.04*1,000 = $40
Annual return = 9%/2 = 4.5%
FV= 1,000, PMT= 40, N= 78, I/Y= 4.5
Worth of bond = PV(Fv, Pmt, N, I/Y)
Worth of bond = PV(1000, 40, 78, 4.5%)
Worth of bond = $892.48
On January 1, 2020, Crane Company purchased 12% bonds having a maturity value of $430,000, for $462,600.36. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Crane Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
1. Prepare the journal entry at the date of the bond purchase.
2. Prepare a bond amortization schedule.
Answer and Explanation:
1. The journal entry is given below;
On Jan 1, 2020
Investment in bond Dr $430,000.00
Premium on bond investment Dr $32,600.36
To Cash $462,600.36
(being the investment in bond is recorded)
2. The preparation of the bond amortization schedule is presented below;
Date Cash Interest Premium Carrying amount of
Received revenue Amortized bonds
1-Jan-20 $462,600.36
1-Jan-21 $51,600.00 $46,260.04 $5,339.96 $457,260.40
(12% of $430,000)
1-Jan-22 $51,600.00 $45,726.04 $5,873.96 $451,386.44
1-Jan-23 $51,600.00 $45,138.64 $6,461.36 $444,925.08
1-Jan-24 $51,600.00 $44,492.51 $7,107.49 $437,817.59
1-Jan-25 $51,600.00 $43,782.41 $7,817.59 $430,000.00
Bramble Company purchased a new van for floral deliveries on January 1, 2018. The van cost $66000 with an estimated life of 5 years and $13500 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the balance of the Accumulated Depreciation account at the end of 2019
Answer:
$42,240
Explanation:
The computation of the balance of the Accumulated Depreciation account at the end of 2019 is as follows;
But before that the depreciation rate is
= 1 ÷ 5 × 2
= 40%
For the first year, the depreciation expense is
= $66,000 × 40%
= $26,400
Now for the 2019, the depreciation expense is
= ($66,000 - $26,400) × 40%
= $15,840
Now the accumulated depreciation is
= $26,400 + $15,840
= $42,240
For the first time in two years, Big G (the cereal division of General Mills) raised cereal prices by 4 percent. If, as a result of this price increase, the volume of all cereal sold by Big G changed by -2 percent, what can you infer about the own price elasticity of demand for Big G cereal
Answer:
the coefficient of elasticity is 0.5. Thus, demand is inelastic.
Explanation:
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.
Price elasticity = 2/4 = 0.5
Because demand is less than1, big g has an inelastic demand.
Lay Perfect Pillow Company sells specialty pillows and accessories to customers. Its fiscal year ends on December 31. The following transactions occurred in the current year:
Purchased $250,000 of new pillow inventory; paid $90,000 in cash and owed the rest on account.
Paid employees $180,300 in wages for work during the year; an additional $3,700 for the current year's wages will be paid in January of the next year.
Sold pillows to customers for $750,000; received $500,000 in cash and customers owed the rest on account. The cost of the pillow inventory to Lay Perfect Pillow was $485,000.
Paid $17,200 cash for utilities for the year.
Received $70,000 from customers as deposits on orders of new pillows to be sold to the customers in January of the next year.
Received a $19,130 utilities bill for December of the current year that will be paid in January of the next year.
Complete the following statements
Cash Basis Income Statement Accrual Basis Income Statement
Statement Statement
Revenues Revenues
Cash Sales Sales to Customers
Customer Deposits
Expenses Expenses
Inventory Purchase Cost of Sales
Wages Paid Wages expense
Utilities paid Utilities expense
Net Income Net Income
Answer and Explanation:
The preparation of the following statement is
Cash Basis Statement Accrual Basis Statement
Income Statement Income Statement
Revenues Revenues
Cash Sales $500,000 Sales to Customers $750,000
Customer Deposits $70,000
Total $570,000 Total $750,000
Expenses Expenses
Inventory Purchase $90,000 Cost of Sales $485,000
Wages Paid $180,300 Wages expense $184,000
Utilities paid $17,200 Utilities expense $19,130
Total $287,500 Total $688,130
Net Income $282,500 Net Income $61,870
The CFO of the company believes that an appropriate annual interest rate on this investment is 9%. What is the present value of this uneven cash flow
Answer:
$1,685,335
Explanation:
Hi, your question is incomplete, I have searched for the full question online and I have uploaded it as an image below.
Uneven cash flows are cash flows that are received in uneven amounts and possibly uneven periods as well.
We can simply use the CFj function of a financial calculator to determine the present value of uneven cash flows as follows :
$0 CF 0
$250,000 CF 1
$20,000 CF 2
$330,000 CF 3
$450,000 CF 4
$550,000 CF 5
$375, 000 CF 6
i/yr = 4 %
Shift NPV gives $1,685,335
Therefore,
The present value of this uneven cash flow is $1,685,335
A bank currently has $100,000 in checkable deposits and $15,000 in actual reserves. If the reserve ratio is 20 percent, the bank has ________ in money-creating potential. If the reserve ratio is 14 percent, the bank has ________ in money-creating potential. multiple choice
Answer:
A bank currently has $100,000 in checkable deposits and $15,000 in actual reserves. If the reserve ratio is 20 percent, the bank has __$80,000__ in money-creating potential. If the reserve ratio is 14 percent, the bank has ___$86,000__ in money-creating potential.
Explanation:
a) Data and Calculations:
Checkable deposits = $100,000
Actual reserves = $15,000
Required reserves = $20,000 ($100,000 * 20%)
Excess reserves = -$5,000 ($15,000 - $20,000)
Money-creating potential = $80,000 ($100,000 - $20,000)
Total amount of money the bank can create = $500,000 ($100,000/20%)
b) Checkable deposits = $100,000
Actual reserves = $15,000
Required reserves = $14,000 ($100,000 * 14%)
Excess reserves = $1,000 ($15,000 - $14,000)
Money-creating potential = $86,000 ($100,000 - $14,000)
Total amount of money the bank can create = $714,286 ($100,000/14%)