Last year Stealth Bank received $60 million in interest payments from borrowers. $20 million in loans were written off as uncollectible. It paid out $22 million in interest to its depositors and collected $35 million for various fees it charged. Administration costs were $15 million and taxes were $3 million. What was the value of Stealth Bank's accounting profits?

Question

Quizplus · Accepted Answer

Accounting profits are calculated by subtracting total expenses from total revenues. Here, total revenues are $60 million (interest payments) + $35 million (fees) = $95 million. Total expenses are $20 million (loans written off) + $22 million (interest to depositors) + $15 million (administration costs) + $3 million (taxes) = $60 million. Therefore, accounting profits = $95 million - $60 million = $35 million.

Last Year Stealth Bank Received $60 Million in Interest Payments