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The last request from the head of the division to you is based o millions of dollars): Assets $ Liabilities and equity 3 Deposits Liquid assets 30 Interbank loan Cash $ 35 01 5

The last request from the head of the division to you is based o millions of dollars): Assets $ Liabilities and equity 3 Deposits Liquid assets 30 Interbank loan Cash $ 35 01 5

Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter7: Financial Activities
Section: Chapter Questions
Problem 7QE
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The last request from the head of the division to you is based on the following year-end balance sheet of Unibank (in millions of dollars): $ Liabilities and equity 15) 3 Deposits Liquid assets 30 Interbank loan 55 Equity Total assets 88 Total liabilities and equity 88 The loans are primarily fixed-rate, medium-term loans, while the deposits are either short-term or variable-rate deposits. Rising interest rates have caused increases in loan defaults and, as a result, 4 per cent of the loans are considered to be uncollectable and thus have no economic value. Half (50%) of these uncollectable loans will be charged off. Further, the increase in interest rates has caused a 3 per cent decrease in the market value of the remaining loans. What is the impact on the balance sheet after the necessary adjustments are made according to book value accounting? Assets Cash Loans $ 35 5 48
Transcribed Image Text:The last request from the head of the division to you is based on the following year-end balance sheet of Unibank (in millions of dollars): $ Liabilities and equity 15) 3 Deposits Liquid assets 30 Interbank loan 55 Equity Total assets 88 Total liabilities and equity 88 The loans are primarily fixed-rate, medium-term loans, while the deposits are either short-term or variable-rate deposits. Rising interest rates have caused increases in loan defaults and, as a result, 4 per cent of the loans are considered to be uncollectable and thus have no economic value. Half (50%) of these uncollectable loans will be charged off. Further, the increase in interest rates has caused a 3 per cent decrease in the market value of the remaining loans. What is the impact on the balance sheet after the necessary adjustments are made according to book value accounting? Assets Cash Loans $ 35 5 48
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