a. Balances in the company\'s accounts at the First National Bank; checking $13,

ID: 2510042 • Letter: A

Question

a. Balances in the company's accounts at the First National Bank; checking $13,500, savings $22.100. b. Undeposited customer checks of $5,200 Currency and coins on hand of S580 d. Savings account at the East Bay Bank with a balance of $400,000. This account is being used to accumulate cash for future plant expansion (in 2020) e, $20,000 in a checking account at the East Bay Bank. The balance in the account represents a 20% compensating balance for a $100,000 loan with the bank. Red Wing may not withdraw the funds until the loan is due in 2021 f US. Treasury bils; 2-month maturity bills totaling $15,000, and 7 month bill's totaling $20.000. Required: 1. Determine the correct balance of cash and cash equivalents to be reported in the current asset section of the 2018 balance sheet Cash and cash equivalents includes: Balance in checking account Balance in savings account b Undeposited customer checks . Currency and coins on hand d. Balance in savings account e. Balance in checking account f. US. treasury bills Total

Explanation / Answer

Answer:

Cash and cash equivalents includes:

Balance in checking account

13500

Balance in savings account

22100

Undeposited customer checks

5200

Currency and coins on hand

580

Balance in savings account (w.n-1)

Balance in checking account(w.n-2)

U.S. treasury bills

15000

Total

56380

Working note:1

Balance in savings account = 0 because the savings account at the Bank is being used to accumulate cash for future plant expansion so this balance will appear as investment in Balance sheet and not under the current assets action

Working note:2

It was given in the question that balance in the account represents a 20% compensating balance for loan with the bank. It may not withdraw the funds until the loan is due in 2020 so it will not under the current assets action