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    Checking Account Balances

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    For each individual situation, determine the amount that should be reported as cash. If the item(s) is not reported as cash, explain 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 $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 $1350

    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) $48,000l; 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 $7000 to company executive, payable on demand; refundable deposit of $26,000 paid to federal government to guarantee performance on construction contract.

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    Solution Preview

    1. Cash balance of $925,000. Only the checking account balance should be reported as cash. The certificates of deposit of $1,400,000 should be reported as a temporary investment, the cash advance to subsidiary of $980,000 should be reported as a receivable, and the utility deposit of $180 should be identified as a receivable from the gas company.

    2. Cash balance is $584,650 computed as follows:
    Checking account balance $600,000
    Overdraft (17,000)
    Petty ...

    Solution Summary

    This Solution contains journal entries and a brief explanation.