Final answer:
To calculate cash and cash equivalents, one would sum the current account, petty cash fund, and saving deposit, while excluding the legally restricted compensating balance. The correct answer cannot be determined without specific figures for each account.
Step-by-step explanation:
The student is seeking assistance with determining the total amount that should be reported as cash and cash equivalents for Lamentable Company as of December 31, 2020. Based on the information provided, current and time deposit accounts, minus legally restricted funds, should be calculated alongside the petty cash fund to determine this number. Compensating balances that are legally restricted are not considered as cash equivalents due to their withdrawal restrictions.
To calculate the total amount reported as cash and cash equivalents, we would add the balances from the current account, petty cash fund, time deposit, and saving deposit, and then deduct any funds that are not available for immediate use, such as the compensating balance.
Assuming all other deposits can be considered as cash or cash equivalents, and given that the compensating balance of P400,000 cannot be included, the correct answer would be:
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- Cash in bank - current account (minus compensating balance)
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- Petty cash fund (fully reimbursed)
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- Time deposit (due within 3 months therefore qualifying as a cash equivalent)
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- Saving deposit
Without specific figures provided for each account, one cannot definitively choose from the multiple-choice options provided. However, by understanding the principle, the student can apply the calculation once the actual figures are known.