Question

E7-2.  

(Determining Cash Balance)

(LO 1) Presented below are a number of independent situations.

Instructions

For each individual situation, determine the amount that should be reported as cash. If the item(s) is not reported as cash, explain the rationale.

1. Checking account balance $925,000; certificate of deposit $1,400,000; cash advance to subsidiary of $980,000; utility deposit paid to gas company $180.

2. Checking account balance $600,000; an overdraft in special checking account at same bank as normal checking account of $17,000; cash held in a bond sinking fund $200,000; petty cash fund $300; coins and currency on hand $1,350.

3. Checking account balance $590,000; postdated check from customer $11,000; cash restricted due to maintaining compensating balance requirement of $100,000; certified check from customer $9,800; postage stamps on hand $620.

4. Checking account balance at bank $37,000; money market balance at mutual fund (has checking privileges) $48,000; NSF check received from customer $800.

5. Checking account balance $700,000; cash restricted for future plant expansion $500,000; short-term Treasury bills $180,000; cash advance received from customer $900 (not included in checking account balance); cash advance of $7,000 to company executive, payable on demand; refundable deposit of $26,000 paid to federal government to guarantee performance on construction contract.

Answer 1

Answer:
1)
Particulars	Amount (in $ )
Checking account balance	$ 925,000
Cash Balance	$ 925,000
2)
Particulars	Amount (in $ )
Checking account balance	$ 600,000
Add: Petty cash fund	$ 300
Add: Coins and currency on hand	$ 1,350
Less: Overdraft in special checking account	($ 17,000)
Cash Balance	$ 584,650
3)
Particulars	Amount (in $ )
Checking account balance	$ 590,000
Add: Certified check from customer	$ 9,800
Cash Balance	$ 599,800
4)
Particulars	Amount (in $ )
Checking account balance	$ 37,000
Add: Money Market Balance at Mutual Fund	$ 48,000
Cash Balance	$ 85,000
5)
Particulars	Amount (in $ )
Checking Account Balance	$ 700,000
Add: Cash advance received from Customer	$ 900
Cash Balance	$ 700,900