Question

Lori's Company has the following​ items: cash in a checking​ account, $ 6 comma 000​; cash in a savings​ account, $ 9 comma 000​; highminusgrade government securities due in one month​ (purchased last​ month), $ 3 comma 586​; accounts​ receivable, $3,000. How much should appear as Cash and Cash Equivalents on the balance​ sheet?

Answer 1

18,586.

Step-by-step explanation:

In-order to get understanding of Cash and Cash Equivalents, lets break-up this account and see what does it mean.

Cash

It includes the paper money that businesses have on hand, coins, and demand deposits. Usually Checking Accounts and Savings Accounts are demand deposits and you can easily withdraw your money, so these are termed as Cash.

Cash Equivalents

These are marketable securities that mature in a period of less than three months (90 days). Any other financial security that can be easily converted into cash fall under this category.

Looking at the scope of Cash and Cash Equivalents, the amount that should appear on the balance sheet is $18,586 (6,000 + 9,000 + 3,586).

Note: Sometimes there is a withdrawal restriction on Saving Accounts and you can not withdraw your money from it before six months, if that is the case then it should not be included in Cash and Cash Equivalents.

Answer 2

$18,586

Step-by-step explanation:

Cash and cash equivalent are monetary instruments that are already in liquid form (that is cash) or will be converted to cash within 3 months.

Account receivables are an element of current assets ( assets to be realized in 12 months or less) and not part of cash and cash equivalents.

Hence amount to be reported as Cash and Cash equivalent in balance sheet

=$6,000 + $9,000 + $3,586

= $18,586