Question

Logistics Company had the following items listed in its trial balance at 12/31/2018: Balance in checking account, Bank of the East $ 382,000 Treasury bills, purchased on 11/1/2018, mature on 1/30/2019 19,000 Loan payable, long-term, Bank of the East 330,000 Included in the checking account balance is $49,000 of restricted cash that Bank of the East requires as a compensating balance for the $330,000 note. What amount will Logistics include in its year-end balance sheet as cash and cash equivalents

Answer 1

The amount to include as cash and cash equivalents in Logistics Company's year-end balance sheet is $352,000, which is the sum of the balance in the checking account minus the restricted cash, plus the value of the Treasury bills.

Step-by-step explanation:

The student has asked about the amount to include as cash and cash equivalents in the year-end balance sheet for Logistics Company.

To calculate this, we will adjust the balance in the checking account by subtracting the restricted cash that cannot be used freely because it is required as a compensating balance for the long-term loan.

Therefore, the available cash and cash equivalents is calculated as:

• Balance in checking account: $382,000
• Less: Restricted cash: $49,000
• Plus: Treasury bills (mature within 90 days): $19,000
• Total cash and cash equivalents: $352,000

Treasury bills are considered cash equivalents since they are liquid investments that are easily convertible to known amounts of cash and they are subject to an insignificant risk of changes in value.

Answer 2

Answer: $352,000

Step-by-step explanation:

The information needed to calculate the cash and cash equivalent are:

Balance in checking account, Bank of the East = $ 382,000

The restricted cash included in the checking account = $49,000

Treasury bills = $19,000

We subtract the restricted cash from the balance in the checking account and then add it to the treasury bills. This will be:

= ($382,000 - $49,000) + $19,000

= $333,000 + $19,000

= $352,000