Question

Study the following items related to transactions during the year to September 30, 2020 for Kendra Ltd. All transactions are reported on the financial statements in $XCD.

I. A bank overdraft of $200,000 in a chequing account at St Kitts National Bank.

II. A saving account with a balance of $400,000 at Open Campus Bank and chequing account with an overdraft of $100,000 at the same bank repayable on demand.

III. The Operation Manager was given a salary advance of $2,000 on August 24, 2020 and this amount was deducted from his October salary.

IV. CAD$3,045 on hand from tips up to March 31, 2020, its pre-COVID operations when the exchange rate was CAD$1 = $2.01 XCD. On September 30, 2020, the exchange rate was CAD$1 = $1.95 XCD

V. Special Edition Independence postage stamps on hand valued at $200.

VI. Cash holdings of US$100,000, the exchange rate on September 30, 2020 is $2.70.

VII. Petty cash on hand valued at $1,500.

VIII. A cheque in the amount of $5,000 and dated October 23, 2020 was received from a customer on September 27, 2020.

IX. Short term 60 days treasury bill valued at $35,000.

X. Kendra Ltd. invested $1,000,000 in a money market fund with Mona Campus Bank on July 10, 2020 which will mature on October 9, 2020.

Required:

a. List all items from above that would NOT be classified as cash or cash equivalents in the current asset section of Kendra Ltd. Statement of Financial Position as at September 30, 2020? State how each of these items would then be classified in the financials. (

b. Prepare the necessary journal entry at September 30, 2020 to account for Item IV.

C. Using the information in B above, calculate the cash and cash equivalent value that would appear in Kendra Ltd. Statement of Financial Position on September 30,2020.

Answer 1

Answer (a):

Particulars	Amount	Explanation
Bank Overdraft on chequing account	$200,000	Bank overdraft normally will not be included in cash and cash equivalent unless it is repayable on demand. This will be treated as other Current Liability on the balance sheet. And in cashflow statement it will be considered as Financing activity.
Advance salary	$2,000	This will be treated as Other current assets (Advances to employees)
Postage stamps	$200	This will be treated as Prepaid expenses on balance sheet.

Answer (b):

Date	Particulars	Amount	Amount
09/30/2020	Foreign exchange loss A/c	182.7
	Cash on hand - Foreign currency		182.7

Answer (c):

Amount to be shown in the balance sheet as cash and cash equivalent, as on September 30, 2020 = XCD 5,937.75