4.2k views
0 votes
Kaniper Company has the following items at year-end:

Cash in bank $35,000
Petty cash 300
Short-term paper with maturity of 2 months 5,500
Postdated checks 1,400
Kaniper should report cash and cash equivalents of
a. $35,000.
b. $35,300.
c. $40,800.
d. $42,200.

User KennyH
by
8.3k points

1 Answer

5 votes

Final answer:

Kaniper Company should report cash and cash equivalents of $40,800, which is the sum of its cash in bank, petty cash, and short-term paper with maturity of 2 months. Postdated checks are excluded as they are not immediately available funds.

Step-by-step explanation:

The items Kaniper Company has at year-end need to be categorized to accurately report cash and cash equivalents. Cash and cash equivalents generally include items that are readily convertible to a known amount of cash and have an original maturity of three months or less when purchased. Using this definition:

  • Cash in bank ($35,000) is considered as cash.
  • Petty cash ($300) is considered as cash.
  • Short-term paper with a maturity of 2 months ($5,500) is considered as cash equivalents since they have a short maturity period and can be easily converted into cash.
  • Postdated checks ($1,400), however, are not included since they cannot be cashed until the date specified on the checks.

Therefore, when we sum up the cash ($35,000 + $300) and cash equivalents ($5,500), Kaniper should report cash and cash equivalents of $40,800 (Option c). Postdated checks are not included because they are not immediately available funds.

User Lindelof
by
7.7k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.