6- A bank faced with a large and sudden loss of deposits is likely to shut down despite a fundamentally sound balance sheet. Why could this be? a. Banks have accountants that are too optimistic. b. Banks purposely lie about their balance sheets in order to attract more clients. c. Many bank assets are illiquid and cannot be sold quickly to meet deposit obligations without substantial loss to the bank. d. Many banks operate on a budget that exceeds their actual reserves. e. Many banks will shut down to preserve their interest profits.

The following pertains to smoke, inc.’s investment in debt securities: on december 31, year 3, smoke reclassified a security acquired during the year for $70,000. it had a $50,000 fair value when it was reclassified from trading to available-for-sale. an available-for-sale security costing $75,000, written down to $30,000 in year 2 because of an other-than-temporary impairment of fair value, had a $60,000 fair value on december 31, year 3. what is the net effect of the above items on smoke’s net income for the year ended december 31, year 3?