Question

The balance sheet for the newly formed Last National Bank is shown below. The reserves listed on the balance sheet are reserves on deposit at the Federal Reserve. The cash is vault cash held at the bank. Last National Bank Balance Sheet 1 Liabilities and net worth Assets Cash $ 8,000 Checkable $ 138,000 $ deposits 140,000 Stock shares 295,000 $ Reserves Property 305,000 $ Instructions: Enter your answers as whole numbers. a. Suppose a depositor at the bank writes a check for $19,000 to a contractor to pay for some remodeling work done on her home. The contractor deposits the check in his bank (which is a different bank). What will Last National Bank's balance sheet look like after the check clears? Record the values in the table below. Assets Last National Bank Balance Sheet 2 Liabilities and net worth Checkable deposits Stock shares Cash Reserves Property b. If the reserve requirement is 12 percent, what is the total amount of excess reserves held by Last National Bank after the check clears? $

Answer 1

Answer a.

Last National bank's Balance sheet 2

Assets Liabilities Cash $ 8000 Checkable deposits $ 119000

Reserve $ 121000 Stock shares $305000

Property $ 295000

Answer b.

Required reserve = 10 % of deposits

= $119000 × 10% =$11900

Excess reserve = total reserve - required reserve

= $121000 - $11900 =$ 109100