Suppose that a new customer opens a checking account and a saving account, placing $250,000 in each. Later, the bank makes a loan of $500,000 to a business firm. For this bank
A) assets increased by $250,000 because the saving account is an asset, while liabilities increased by $250,000 because the checking account is a liability.
B) assets increased by $500,000 because the checking and saving accounts are assets, and liabilities increased by $500,000 because the loan is a liability.
C) assets increased by $500,000 because the loan is an asset, and liabilities increased by $500,000 because the checking and saving accounts are liabilities.
D) assets remained unchanged but liabilities increased by $500,000 because of the loan.

Question

Quizplus · Accepted Answer

Assets increase by $500,000 due to the loan given out, which is considered an asset for the bank. Liabilities increase by $500,000 because the checking and saving accounts, where the customer deposited a total of $500,000, are considered liabilities for the bank.

Suppose That a New Customer Opens a Checking Account and a Saving