Question

Kennison Company has cash in bank of $20,000, restricted cash in a separate account of $3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should report cash of________.

Answer 1

Kennison Company should report a cash balance of $22,000 on their balance sheet, which includes both their unrestricted cash and restricted cash, minus any bank overdrafts.

Step-by-step explanation:

The student has asked how to report cash on a company's balance sheet when there are different categories of cash and cash equivalents, and specifically, how the Kennison Company should report their cash holdings.

With $20,000 in regular bank accounts, $3,000 in a restricted account, and a $1,000 bank overdraft, Kennison should report its cash holdings by combining its accessible cash and restricted cash, then subtracting any overdrafts. Therefore, the cash balance reported would be the sum of unrestricted cash and restricted cash minus the overdraft, which equates to $22,000 ($20,000 + $3,000 - $1,000).

Understanding how to classify and report cash and cash equivalents is crucial to producing an accurate balance sheet. This type of accounting question falls within financial reporting practices and categorization of liquid assets, both of which are important in the day-to-day operations and long-term strategic planning for a business.