Question

Given the following balance sheet and income statement data for the year ended December 31, what is the final figure for the numerator in the formula for the days' cash on hand? Cash $300,000 Short-term investments 400,000 Accounts receivable 900,000 Total operating expenses 640,000 Depreciation expense 140,000 a. $1,600,000 b. $500,000 c. $300,000 d. $700,000

Answer 1

The final figure for the numerator in the formula for days' cash on hand is $700,000, the sum of cash and short-term investments. The bank's net worth from the provided T-account balances is $220.

Step-by-step explanation:

Calculating Days' Cash On Hand:
When determining the final figure for the numerator in the formula for days' cash on hand, we need to look for cash and cash equivalents from the balance sheet. As stated, the company has Cash $300,000 and Short-term investments $400,000. Thus, the numerator for the days' cash on hand would be the sum of these two items. Adding the cash and short-term investments together gives us a total of $700,000 which will be used in the numerator of the days' cash on hand calculation.

Bank's T-account Balance Sheet:

For a bank with deposits of $400, reserves of $50, government bonds worth $70, and loans of $500, we structure the T-account balance sheet as follows:

• Assets: Reserves + Bonds + Loans = $50 + $70 + $500 = $620
• Liabilities: Deposits = $400

The bank's net worth, also known as equity, is calculated by subtracting liabilities from assets. Thus: $620 (Assets) - $400 (Liabilities) gives a net worth of $220.

Answer 2

Option (d) is correct.

Step-by-step explanation:

Given that,

Cash = $300,000

Short-term investments = 400,000

Accounts receivable = 900,000

Total operating expenses = 640,000

Depreciation expense = 140,000

The numerator part in the formula of days' cash on hand is cash and cash equivalents available.

Cash and cash equivalents available:

= Cash + Short term investments

= $300,000 + $400,000

= $700,000