Question

Presented below are a number of independent situations.

Instructions

For each individual situation, determine the amount that should be reported as cash. If the item(s) is not reported as cash, explain the rationale.

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.

2. Checking account balance \(600,000; an overdraft in special checking account at same bank as normal checking account of \)17,000; cash held in a bond sinking fund \(200,000; petty cash fund \)300; coins and currency on hand \(1,350.

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.

4. Checking account balance at bank \(37,000; money market balance at mutual fund (has checking privileges) \)48,000; NSF check received from customer \(800.

5. Checking account balance \)700,000; cash restricted for future plant expansion \(500,000; short-term Treasury bills \)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.

Short answer

Event	Cash Balance
1	$925,000
2	$584,650
3	$599,800
4	$85,000
5	$700,900

Step-by-step solution

Definition of NSF Checks

A check issued by the individual whose bank account does not have sufficient balance to make payment is known as an NSF check.

Reporting of items

1. The business entity must report only the balance of checking account, $925,000. The deposit certificate must be reported under temporary investments, cash advances, and deposits to utility companies must be reported as receivables.

2. Cash account must include:

Particular	Amount $
Checking account	$600,000
Add: Petty cash	300
Less: overdraft	(17,000)
Add: coins and currency	1,350
Cash	$584,650

Overdraft must be reported in current liabilities, and sinking funds must be reported in non-current assets section.

3. Cash account must include the following:

Particular	Amount $
Checking account	$590,000
Add: Petty cash	9,800
Cash	$599,800

Postdates checks received from the customer must be reported as receivables. Cash restricted for compensating balance is reflected in notes to financial statement, and postage and stamp must be reported in supplies.

4. Cash account must include the following:

Particular	Amount $
Checking account	$37,000
Money market mutual funds	48,000
Cash	$85,000

NSF checks received from the customer are reported as receivables.

5. Cash account must include the following:

Particular	Amount $
Checking account	$700,000
Add: Cash received from the customer	900
Cash	$700,900

Cash restricted for future expansion must be reported as non-current assets. Treasury bills with short-term maturity must be reported as a temporary investment. Cash advances and refundable deposits must be reported as receivables.