Question: The Hokie High Bank has Gross Loans of $550 million with an ALL account of $30 million. Two years ago the bank made a loan for $10 million to finance the Hokie Hotel. One million in principal was repaid before the borrowers defaulted on the loan. The Loan Committee at Hokie High Bank believes the Hotel will sell at auction for $7 million and they want to charge off the remainder immediately.
a. The dollar figure for Net Loans before the charge-off is?
b. After the charge-off, what are the dollar figures for Gross Loans, ALL, and Net Loans assuming no other transactions?
c. If the Hokie Hotel sells at auction for $8 million, how will this affect the pertinent balance sheet accounts?