The controller of the Red Wing Corporation is in the process of preparing the co
ID: 2491893 • Letter: T
Question
The controller of the Red Wing Corporation is in the process of preparing the company’s 2013 financial statements. She is trying to determine the correct balance of cash and cash equivalents to be reported as a current asset in the balance sheet. The following items are being considered:
Savings account at the East Bay Bank with a balance of $530,000. This account is being used to accumulate cash for future plant expansion (in 2015).
$23,000 in a checking account at the East Bay Bank. The balance in the account represents a 10% compensating balance for a $230,000 loan with the bank. Red Wing may not withdraw the funds until the loan is due in 2016.
Determine the correct balance of cash and cash equivalents to be reported in the current asset section of the 2013 balance sheet.
a. Balances in the company’s accounts at the First National Bank; checking $14,800, savings $23,400. b. Undeposited customer checks of $6,500. c. Currency and coins on hand of $710. d.Savings account at the East Bay Bank with a balance of $530,000. This account is being used to accumulate cash for future plant expansion (in 2015).
e.$23,000 in a checking account at the East Bay Bank. The balance in the account represents a 10% compensating balance for a $230,000 loan with the bank. Red Wing may not withdraw the funds until the loan is due in 2016.
f. U.S. Treasury bills; 2-month maturity bills totaling $28,000, and 7-month bills totaling $33,000.Explanation / Answer
d. The $530,000 savings accoutns for future plan expansion should be classified as a non-current asset.
e. The $23,000 in the checking accounts is a compensating balance and should be classified as a non-current asset.
f. The $33,000 in the 7-month bills should be recorded as a current asset (assuming it not to be U.S treasury bill)
Cash and cash equivalents includes: a. Balance in checking account 14800 Balance in savings account 23400 b. Undeposited customer checks 6500 c. Currency and coins on hand 710 d. Balance in savings account - e. Balance in checking account - f. U.S. treasury bills 28000 Total 73410Related Questions
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