When a Bank Suspects That a $1 Million Loan Might

Multiple Choice

When a bank suspects that a $1 million loan might prove to be bad debt that will have to be written off in the future the bank

A) can set aside $1 million of its earnings in its loan loss reserves account.
B) reduces its reported earnings by $1,even though it has not yet actually lost the $1 million.
C) reduces its assets immediately by $1 million,even though it has not yet lost the $1 million.
D) reduces its reserves by $1 million,so that they can use those funds later.