Exercise 7-2 Presented below are a number of independent situations. For each in

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 $925,000: certificate of deposit $1,400.000; cash advance to subsidiary of $980,000; utility deposit paid to gas company $180 Cash balance 2. Checking account balance $600,000 an overdraft in special checking account at same bank as normal chacking account of $17,000: cash held in a bond sinking fund $200,000: patty cash fund $300: coins and currency on hand $1.350 Cash balance 3. Checking account balance $590,000: postdated check from customer $11.000: cash restricted due to maintaining compensating balance requirement of $100,000: certified check from customer $9,800: postage stamps on hand $620 Cash balances 4. Checking account balance at bank $37,000: money market balance at mutual fund (has chacking privileges) $48,000: NSF check recaived from customer $800. Cash balance s . Checking account balance $700,000 cash restricted for future plant expansion $500,000: short-term Tressury bills (which mature in 6 months) $180,000; cash advance received from customer $900 (not included in checking account balance): cash advance of $7,000 to company executive, payable on demand: refundable deposit of $26,000 paid to federal government to guarantee performance on construction contract.

Explanation / Answer

1) The cash balance - $925,000. The Certificate of Deposit are to be reported as temporary investment, the cash advance to subsidiary needs to be reported as Account receivable, the utility deposit should be reported as a receivable from the gas company.

2) Cash balance is $584,650 = ($600,000 - $17,000) + $300 + $1,350

Bonds should be reported as a non-current asset

3) Cash balance is $599,800 = $590,000+9,800

Postdated check cannot be realized until deposited, postage stamps is a prepaid expense

4) Cash balance is $ 85,000. = $37,000 + $ 48,000

NSF Check is receivable till relased

5) Cash balance is $ 570,900. = $70,000 + $ 900 + $ 500,000

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