Question

Presented below are a number of independent situations.

For each individual situation, determine the amount that should be reported as cash.

1. Checking account balance $937,790; certificate of deposit $1,444,000; cash advance to subsidiary of $983,730; utility deposit paid to gas company $188.

Cash balance
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2. Checking account balance $514,570; an overdraft in special checking account at same bank as normal checking account of $18,300; cash held in a bond sinking fund $246,580; petty cash fund $308; coins and currency on hand $1,370.

Cash balance
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3. Checking account balance $617,620; postdated check from a customer $13,030; cash restricted due to maintaining compensating balance requirement of $117,680; certified check from customer $9,640; postage stamps on hand $625.

Cash balance
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4. Checking account balance at bank $46,220; money market balance at mutual fund (has checking privileges) $52,790; NSF check received from customer $859.

Cash balance
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5. Checking account balance $716,200; cash restricted for future plant expansion $517,960; short-term Treasury bills $190,700; cash advance received from customer $937 (not included in checking account balance); cash advance of $7,840 to company executive, payable on demand; refundable deposit of $29,700 paid to federal government to guarantee performance on construction contract.

Cash balance
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Answer 1

Answer / Explanation:

(1) Cash   balance   of   $937,790.   Only   the   checking   account   balance   should   be reported as cash. The certificates of deposit of $1,444,000 should be reported as   a   temporary   investment,   the   cash   advance   to   subsidiary   of   $983,730 should be reported as a receivable, and the utility deposit of $188 should be identified as a receivable from the gas company.

(2) Cash balance is $584,650 computed as follows:

Checking account balance                     $514, 570

Overdraft                                                   (18,300)

Petty cash                                                  308

Coin and currency                                    1,370  

                                                               $534, 548

Cash held in a bond sinking fund is restricted. Assuming that the bonds are non current, the restricted cash is also reported as non current.

(3) Cash balance is $617, 620 computed as follows:

Checking account balance                       $617, 620

Certified check from customer                  9, 640

                                                                  $627, 260

The post dated check of  $13,030   should   be   reported as a receivable. Cash restricted   due   to   compensating   balance   should   be   described   in   a   note indicating the type of arrangement and amount. Postage stamps on hand are reported as part of office supplies inventory or prepaid expenses.

(4)  Checking account balance                $46,220

Money market mutual fund                       52, $790  

                                                                  $99, 010

The NSF check received from customer should be reported as a receivable.

(5) Cash balance is $700,900 computed as follows:

Checking account balance                          $716,200

Cash advance received from customer         937  

                                                                     $717, 137

Cash restricted for future plant expansion of $517,960 should be reported as a non current asset. Short-term treasury bills of $190,700 should be reported as a temporary investment. Cash advance received from customer of $937 should also be reported as a liability; cash advance of $7,840 to company executive should be reported as a receivable; refundable deposit of $29,700 paid to federal government should be reported as a receivable.