Question

The controller of the Red Wing Corporation is in the process of preparing the company's 2021 financial statements. She is trying to determine the correct balance of cash and cash equivalents to be reported as a current asset in the balance sheet. The following items are being considered:

a. Balances in the company's accounts at the First National Bank, checking $15,000, savings $23,600.
b. Undeposited customer checks of $6,700.
C. Currency and coins on hand of $730.
d. Savings account at the East Bay Bank with a balance of $550,000. This account is being used to accumulate cash for future plant expansion (in 2023).
e. $50,000 in a checking account at the East Bay Bank. The balance in the account represents a 20% compensating balance for a $250,000 loan with the bank. Red Wing may not withdraw the funds until the loan is due in 2024.
f. U.S. Treasury bills; 2-month maturity bills totaling $30,000, and 7-month bills totaling $35,000.

Required: 1. Determine the correct balance of cash and cash equivalents to be reported in the current asset section of the 2021 balance sheet.

Answer 1

To determine the correct balance of cash and cash equivalents for the 2021 financial statements, we need to consider various items such as bank balances, undeposited checks, currency on hand, savings accounts, and U.S. Treasury bills. After calculating the total, the correct balance of cash and cash equivalents to be reported is $111,030.

Step-by-step explanation:

To determine the correct balance of cash and cash equivalents to be reported as a current asset in the balance sheet, we need to consider the items mentioned in the question:

1. Balance in the company's accounts at the First National Bank:

• Checking account: $15,000
• Savings account: $23,600

Undeposited customer checks: $6,700Currency and coins on hand: $730Savings account at the East Bay Bank: $550,000 (held for future plant expansion)Checking account at the East Bay Bank: $50,000 (compensating balance for a loan)U.S. Treasury bills: 2-month maturity bills totaling $30,000 and 7-month bills totaling $35,000

Now, let's calculate the correct balance:

Balance of cash and cash equivalents:

Checking account balance + Savings account balance + Undeposited customer checks + Currency and coins on hand + U.S. Treasury bills = $15,000 + $23,600 + $6,700 + $730 + $30,000 + $35,000 = $111,030

Therefore, the correct balance of cash and cash equivalents to be reported in the current asset section of the 2021 balance sheet is $111,030.