Question
At the start of the quarter, a bank has $55 million (gross) in its loan portfolio and has $1 million in its allowance for loan
At the start of the quarter, a bank has $55 million (gross) in its loan portfolio and has $1 million in its allowance for loan loss account. During the quarter, loan audits indicate that an additional $300,000 of loans will not be paid as promised. These loans have not yet been written off as uncollectible, however. What are the starting and ending gross and net loan amounts and the provision for loan loss account, and what is the effect on the bank's quarterly earnings?
| Beginning of quarter | End of quarter | |||||
| Gross Loans | $ | 55,000,000 | $ | 55,000,000 | ||
| Less: Allowance loan losses | $ | 1,000,000 | $ | 1,300,000 | ||
| Net Loans | $ | 54,000,000 | $ | 53,700,000 | ||
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
15th edition
77861612, 1259194078, 978-0077861612, 978-1259194078
