Scenario: Amateur Bank is just starting out and has had the following transactions:
• Amateur Bank takes out a $3,000 loan from Pro Bank.
• Amateur bank has $2,500 invested in building and operations.
• Suzie deposits $1,200.
• Joe deposits $750.
• Robbie takes out a loan for $900.
• Jackie takes out a business loan for $625.
• Amateur Bank invests $1,000 in GoPro.
-Refer to the scenario above.Now Amateur Bank gets a 25 percent return on its investment with GoPro,and Robbie pays back her loan plus 20 percent interest.Amateur Bank uses these returns to pay off part of its loan from Pro Bank.Also,Jackie defaults on her loan.What is the current value of Amateur Bank's stockholders' equity?

Question

Quizplus · Accepted Answer

To find the current value of Amateur Bank's stockholders' equity, we need to first find the total assets, liabilities, and equity of the bank.

Assets:
- Cash: (1,200 + 750) = 1,950
- Investment in GoPro: 1,000
- Building and operations: 2,500
Total assets = 5,450

Liabilities:
- Loan from Pro Bank: 3,000 - (1,000 x 0.25) = 2,250
- Loan to Robbie: 900 x 1.2 = 1,080
- Loan to Jackie (defaulted): 625
Total liabilities = 3,955

Equity:
Equity = Total assets - Total liabilities
= 5,450 - 3,955
= 1,495

Therefore, the current value of Amateur Bank's stockholders' equity is $305 (Option C).

Scenario: Amateur Bank Is Just Starting Out and Has Had