Question

Exercise 7-2 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 $931,500; certificate of deposit $1,414,400; cash advance to subsidiary of $985,850; utility deposit paid to gas company $183.

Cash balance $ _____________

2. Checking account balance $519,300; an overdraft in special checking account at same bank as normal checking account of $17,590; cash held in a bond sinking fund $220,900; petty cash fund $400; coins and currency on hand $1,490.

Cash balance $ ____________

3. Checking account balance $638,200; postdated check from customer $9,970; cash restricted due to maintaining compensating balance requirement of $91,700; certified check from customer $10,634; postage stamps on hand $608.

Cash balance $ _____________

4. Checking account balance at bank $45,900; money market balance at mutual fund (has checking privileges) $48,530; NSF check received from customer $878.

Cash balance $_____________

5. Checking account balance $756,200; cash restricted for future plant expansion $518,100; short-term Treasury bills (which mature in 6 months) $164,740; cash advance received from customer $971 (not included in checking account balance); cash advance of $7,300 to company executive, payable on demand; refundable deposit of $28,500 paid to federal government to guarantee performance on construction contract.

Cash balance $_______________

Answer 1

1 Checking account balance $931,500; certificate of deposit $1,414,400; cash advance to subsidiary of $985,850; utility deposit paid to gas company $183 Cash balance $ 931500 Certificate deposit to be reported as temporary investment Cash advance to subsidiary to be reported as Accounts receivable Utility deposit of $183 should be reported as receivable from gas company account of $17,590; cash held in a bond sinking fund $220,900; petty cash fund $400; coins and currency on hand $1,490. Cash balance $ 503600 Checking Account balance Overdraft Petty Cash Coins and currency on hand Cash balance 519,300 (17,590) 400 1,490 503,600 Cash held in a bond sinking fund to be treated as non current asset

3 Checking account balance $638,200; postdated check from customer $9,970; cash restricted due to maintaining compensating balance requirement of $91,700; certified check from customer $10,634; postage stamps on hand $608 Cash balance $648834 Checking Account balance Certified check from customers Cash balance 638,200 10,634 648,834 Postage stamps would be treated as Prepaid expenses Postdated check cannot be realized until deposited Cash restricted from compensating balance $91700 terms are disclosed in footnote 4 Checking account balance at bank $45,900; money market balance at mutual fund (has checking privileges $48,530; NSF check received from customer $878 Cash balance $94430 Checking Account balance Money market (with checking privileges Cash balance NSF check from customer $878 would be treated as Accounts receivable 45,900 48,530 94,430

5 Checking account balance $756,200; cash restricted for future plant expansion $518,100; short-term Treasury bills (which mature in 6 months) $164,740; cash advance received from customer $971 (not included in checking account balance); cash advance of $7,300 to company executive, payable on demand; refundable deposit of $28,500 paid to federal government to guarantee performance on construction contract. Cash balance $757171 Checking Account balance Cash advance from customer Cash balance 756,200 971 757,171 Short-term treasury bills $164740 needs to be reported as Temporary investment Refundable deposit to federal government $28500 need to be reported as receivable Cash advance to company executive $7,300 needs to be reported as receivable