Question

Specter Co. combines cash and cash equivalents on the balance sheet. Using the following information, determine the amount reported on the year-end balance sheet for cash and cash equivalents. $16,000 cash deposit in checking account. $46,000 bond investment due in 20 years. $11,500 U.S. Treasury bill due in 1 month. $850, 3-year loan to an employee. $3,600 of currency and coins. $1,150 of accounts receivable.

Answer 1

The amount reported on the year-end balance sheet for cash and cash equivalents is $31,100, which includes a cash deposit, a bill due in 1 month, and currency and coins.

Step-by-step explanation:

Calculating Cash and Cash Equivalents

To ascertain the cash and cash equivalents on the year-end balance sheet for Specter Co., we only include items that are considered liquid and close to maturity. Here is the breakdown of what items should be included:

• $16,000 cash deposit in checking account.
• $11,500 U.S. Treasury bill due in 1 month (as it is a cash equivalent).
• $3,600 of currency and coins.

Other items such as the $46,000 bond investment due in 20 years, the $850, 3-year loan to an employee, $1,150 of accounts receivable do not qualify as cash equivalents because they cannot be readily converted to cash or are not due to mature within a short period (usually 3 months).

Thus, the amount reported on the balance sheet for cash and cash equivalents will be:

$16,000 (cash) + $11,500 (Treasury bill) + $3,600 (currency and coins) = $31,100.

Answer 2

Specter Co.

The amount reported on the year-end balance sheet for cash and cash equivalents is:

= $31,100.

Step-by-step explanation:

a) Data and Calculations:

Cash deposit in checking account = $16,000

Bond investment due in 20 years = $46,000

US Treasury bill due in 1 month = $11,500

3-year loan to an employee = $850

Currency and coins = $3,600

Accounts receivable $1,150

Cash and Cash Equivalents:

Cash deposit in checking account $16,000

US Treasury bill due in 1 month 11,500

Currency and coins 3,600

Total cash and cash equivalents = $31,100

b) Cash and Cash Equivalents are Specter's assets that are in the form of cash (currency and coins) and Specter's assets that can be readily converted into cash (Treasury bills and notes, commercial papers. certificates of deposit, money market funds, and cash management pools).