Question

At October 31, Dingo, Inc., had cash accounts at three different banks. One account balance is segregated solely for a November 15 payment into a bond sinking fund. A second account, used for branch operations, is overdrawn. The third account, used for regular corporate operations, has a positive balance. How should these accounts be reported in Dingo’s October 31 classified balance sheet?

A. The segregated account should be reported as a noncurrent asset, the regular account should be reported as a current asset, and the overdraft should be reported as a current liability.
B. The segregated and regular accounts should be reported as current assets, and the overdraft should be reported as a current liability.
C. The segregated account should be reported as a noncurrent asset, and the regular account should be reported as a current asset net of the overdraft.
D. The segregated and regular accounts should be reported as current assets net of the overdraft.

Answer 1

A. The segregated account should be reported as a non-current asset, the regular account should be reported as a current asset, and the overdraft should be reported as a current liability.

Step-by-step explanation:

Cash which is segregated and deposited into a bond sinking fund is presented in a classified balance sheet as a non-current asset because its use is restricted. Bank overdrafts are presented as current liabilities, unless other accounts at the same bank contain sufficient cash to offset the overdraft. The operating account that has a positive balance, should be presented as a current asset.