Q22

Two adjustments are as follows:

1. Loan and lease allowance is the contra asset account which recognizes that some loans will not
be repaid.
2. Unearned income is the income that has been received but not earned.

Q23

1. Difference in interest rates paid by the bank: Interest expense may differ between banks
because of different risk premiums, maturity differences etc.
2. Differences in volume of liabilities: Interest expense is also based on the volume of liabilities
held by the bank.

Q25

ROA = NI/TA
TA = NI/ROA
Total assets = 90938/0.13 = $699,523

Earning assets = 699,523*0.85 = $594,594.6

Q28

Spread = (II/aEA) – (IE/ average Interest-bearing liabilities)

Earning assets = 3000+7000+100000+5000+4000+150000+50000+ 50000 +99000 = 468,000

Interest bearing liabilities = 35000+65000+289000+28000+5000+60000 = 482,000

Interest income = 97571 +60000+12000 = 169,571

Interest expense = 5000+72792+21000 = 98,792

Spread = (169,571/468,000) – (98,792/482,000) = 0.157

Q30

AU ratio = TR/ aTA

TR = Interest income + Non interest income

Total revenue = 173,410 + 11,118 + 5,744 = 190,272

Asset utilization ratio = 190,272/603,000 = 0.316

1. A
2. C
3. B
4. D
5. D
6. A
7. A
8. A
9. B
10. A