Bad Bank buys the bad loans for $232. The proceeds of the loan sale are used by Good Bank to pay off purchased funds.
-What will be the amount of equity on the balance sheet of Good Bank after the sale of the loans?

Question

Quizplus · Accepted Answer

Since the loans were sold for $232, Good Bank received $232 to pay off purchased funds. Therefore, the only change in liabilities is a decrease of $232 in purchased funds. The equity on the balance sheet will decrease by the same amount, resulting in an equity balance of $132 (original equity balance of $364 - $232 decrease in equity). Therefore, the correct answer is (C).

Bad Bank Buys the Bad Loans for $232