Assume that Deposits from other banks earn 1.5%, Mortgaged Backed Securities earn 3.5% and Home Mortgages earn 5.0% (also assume that the bank received $ 15,000 in principal payments during the year, but made an addition $ 17,500 in loans). Assume further that the operating expenses were $ 7,500. Make the accounting entries to recognize this years transactions assuming that $ 2,500 is paid in dividends. Create the income statement and balance sheets for the bank at the end of the year. How did capital adequacy change? Is that better or worse?

Table 1: Balance Sheet for the First National Bank of Delhi \begin{tabular}{lccllc} \hline Asset & Value & Net Value & & Equity & Value \\ \cline { 1 - 2 } \cline { 5 - 7 } Cash (C1) & & 25,000 & & Deposits & 375,000 \\ Deposits in Other Banks (C2) & & 5,000 & & Common Stock (T1) & 15,000 \\ Mortgaged Backed Securities (C3) & & 125,000 & & Preferred Stock (T?) & 5,000 \\ Home Mortgages (C4) & 250,000 & & & Retained Earnings (T1) & 5,000 \\ & 5,000 & 245,000 & & & \\ Allowance for Bad Debt & 400,000 & & Total Debt and Equity & 400,000 \\ Total Assets & & 40000 \end{tabular} Table 1: Balance Sheet for the First National Bank of Delhi \begin{tabular}{lccllc} \hline Asset & Value & Net Value & & Equity & Value \\ \cline { 1 - 2 } \cline { 5 - 7 } Cash (C1) & & 25,000 & & Deposits & 375,000 \\ Deposits in Other Banks (C2) & & 5,000 & & Common Stock (T1) & 15,000 \\ Mortgaged Backed Securities (C3) & & 125,000 & & Preferred Stock (T?) & 5,000 \\ Home Mortgages (C4) & 250,000 & & & Retained Earnings (T1) & 5,000 \\ & 5,000 & 245,000 & & & \\ Allowance for Bad Debt & 400,000 & & Total Debt and Equity & 400,000 \\ Total Assets & & 40000 \end{tabular}