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Presented below are a number of independent situations.

For each individual situation, determine the amount that should be reported as cash.
1. Checking account balance $937,790; certificate of deposit $1,444,000; cash advance to subsidiary of $983,730; utility deposit paid to gas company $188.
Cash balance
2. Checking account balance $514,570; an overdraft in special checking account at same bank as normal checking account of $18,300; cash held in a bond sinking fund $246,580; petty cash fund $308; coins and currency on hand $1,370.
Cash balance
3. Checking account balance $617,620; postdated check from a customer $13,030; cash restricted due to maintaining compensating balance requirement of $117,680; certified check from customer $9,640; postage stamps on hand $625.
Cash balance
4. Checking account balance at bank $46,220; money market balance at mutual fund (has checking privileges) $52,790; NSF check received from customer $859.
Cash balance
5. Checking account balance $716,200; cash restricted for future plant expansion $517,960; short-term Treasury bills $190,700; cash advance received from customer $937 (not included in checking account balance); cash advance of $7,840 to company executive, payable on demand; refundable deposit of $29,700 paid to federal government to guarantee performance on construction contract.
Cash balance

User Shomik
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1 Answer

4 votes

Answer:

1. Checking account balance $937,790; certificate of deposit $1,444,000; cash advance to subsidiary of $983,730; utility deposit paid to gas company $188.

Cash balance $937,790

CDs are not cash equivalents. Only if you are preparing a consolidated balance sheet should you consider the cash advance to the subsidiary as part of your cash balance.

2. Checking account balance $514,570; an overdraft in special checking account at same bank as normal checking account of $18,300; cash held in a bond sinking fund $246,580; petty cash fund $308; coins and currency on hand $1,370.

Cash balance = $514,570 - $18,300 + $308 + $1,370 = $497,948

3. Checking account balance $617,620; postdated check from a customer $13,030; cash restricted due to maintaining compensating balance requirement of $117,680; certified check from customer $9,640; postage stamps on hand $625.

Cash balance = $617,620 - $117,680 + $9,640 = $509,580

4. Checking account balance at bank $46,220; money market balance at mutual fund (has checking privileges) $52,790; NSF check received from customer $859.

Cash balance = $46,220 + $52,790 = $99,010

5. Checking account balance $716,200; cash restricted for future plant expansion $517,960; short-term Treasury bills $190,700; cash advance received from customer $937 (not included in checking account balance); cash advance of $7,840 to company executive, payable on demand; refundable deposit of $29,700 paid to federal government to guarantee ,performance on construction contract.

Cash balance = $716,200 + $190,700 + $937 - $7,840 = $899,997

User Vincent Rolea
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