Question

The following are held by Smite Co.
Cash in checking account $20,000
Cash in bond sinking fund account $30,000
Post-dated check from customer
dated one month
from balance sheet date $250
Petty cash $200
Commercial paper
(matures in two months) $7,000
Certificate of deposit
(matures in six months) $5,000
What amount should be reported as cash and cash equivalents on Smite's balance sheet?
A) $57, 200
B) $32, 200
C) $27, 450
D) $27, 200

Answer 1

Answer:

D) $27, 200

Explanation:

Cash in the checking account and petty cash are considered cash directly. Cash equivalents are securities that can be converted into cash within a 90 day period.

cash and cash equivalents are = checking account + petty cash + commercial paper = $20,000 + $200 + $7,000 = $27,200