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Consider the balance sheet of the following bank.                                            Chase      ------------------------------------------------------------------------------      Reserves        3000       Checkable Deposits      5000      Loans             7000      ...

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Accounting

Consider the balance sheet of thefollowing bank.

                                         Chase

    ------------------------------------------------------------------------------

     Reserves       3000      Checkable Deposits      5000

     Loans           7000       Savings and Time Deposits8000  

     Bond Holdings     4000     Equity              1000

     Using balance sheets, show all thebalance sheet steps of Chase making a loan of $1000. Provide abrief explanation for each step and assume that the loan check isre-deposited in another bank (provide a balance sheet for that bankas well). Verify how the money supply (M2) changes as a result

Answer & Explanation Solved by verified expert
4.4 Ratings (747 Votes)

Journal Entry for making loan.
Debit Credit
Bank A $1000
Loan $1000
(Being loan taken and loan amount received through check.)
Loan has properties of credit balance , we have increased the
loan credit has been given on other hand Cash / Bank account
has propertis of debit balance ,our cash / bank balance
has been increased due to loan hence debit is given to
bank account.
Effect On Balance Sheet :
Increase in liabilty side ( loan)
Increase in asset side (bank balance)
Revised Balance Sheet
Reserve $          3,000 Chekable Deposits (50000+1000) $         6,000
Loans (7000+1000) $          8,000 Saving And Time Deposits $         8,000
Bond Holding $          4,000 Equity $         1,000
Total $        15,000 Total $       15,000

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