Question

Exercise 4-51
Components of Cash

The office manager for Stony Company had accumulated the following information at the end of a recent year:

Item	Amount
Accounts receivable	$22,470
Change for cash registers (currency and coin)	4,800
Amount on deposit in checking account (bank balance)	7,382
Amount on deposit in savings account (bank balance)	30,000
Balance in petty cash	500
Checks received from customers, but not yet deposited in bank	590
Checks sent by Stony to suppliers, but not yet presented at bank for payment	560
Deposits in transit	920
IOU from Richard Sandy, company president	10,000
Notes receivable	13,400
NSF check written by Liam Company	430
Prepaid postage	125

Required:

Calculate the total cash amount Stony will report on its balance sheet.

Answer 1

Answer:

As the "amount of deposit in checking account" is given as per "bank balance", first we need to find "Actual balance in checking account".

Total cash amount Stony will report on its balance sheet is $43,623 as calculated below:

"Account Receivable", "IOU from Richard Sandy, company president", "Notes receivable" and "Prepaid postage" are not part of cash and hence not included. As we have calculated balance of checking account from bank balance, no adjustment for "NSF check written by Liam Company" is necessary.

"Checks sent by Stony to suppliers, but not yet presented at bank for payment" and "Deposits in transit" are considered to arrive at actual balance from bank balance of Checking account as above.