Question

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________.

Answer 1

Kaniper Company should report cash and cash equivalents of $41,200.

Step-by-step explanation:

Kaniper Company's cash and cash equivalents comprise the sum of cash in the bank, petty cash, short-term paper with a maturity of 2 months, and postdated checks. The cash in the bank amounts to $35,000, while petty cash accounts for $300. Additionally, the short-term paper with a maturity of 2 months contributes $5,500 to the cash and cash equivalents. However, postdated checks are not included as cash equivalents until their date arrives, so they aren't part of the immediate available funds. Hence, the total cash and cash equivalents, excluding postdated checks, sum up to $40,800 ($35,000 + $300 + $5,500).

The inclusion of postdated checks adds $400 to the total cash and cash equivalents. This is because, at the year-end, these checks will become available funds. Thus, the total cash and cash equivalents, considering the postdated checks, stand at $41,200 ($40,800 + $400).

Kaniper Company's reported cash and cash equivalents on their financial statements should reflect the sum of immediately available funds, which includes cash in the bank, petty cash, short-term paper with a maturity of 2 months, and postdated checks that are expected to become available in the near future. Therefore, the accurate amount to report as cash and cash equivalents is $41,200.