Which of the following adjustments are made to gross loans and leases to obtain net loans and leases?
A)The loan and lease loss allowance is subtracted from gross loans
B)Unearned income is subtracted from gross interest received
C)Investment income is added to gross interest received
D)a.and b.
E)a.and c.

Question

Quizplus · Accepted Answer

a. The loan and lease loss allowance represents the estimated amount of future loan losses that a bank may incur. It is a contra-asset account that is subtracted from gross loans and leases to determine net loans and leases, which provides a more accurate estimate of a bank's earning assets.
b. Unearned income represents interest income that has been received in advance but has not yet been earned. It is a liability account that is subtracted from gross interest received to determine net interest income.
c. Investment income is not relevant to the calculation of net loans and leases, as it is a separate source of income for banks that is not directly related to their lending activities.

Which of the Following Adjustments Are Made to Gross Loans