Lecture+Note+Chapter+7+with+answers

Lecture+Note+Chapter+7+with+answers - Chapter 7 Cash and...

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Chapter 7: Cash and Receivables Read: Chapter 7, Appendix 7A In-class Exercises: EX7-2, EX7-23, EX7-26, EX7-6, P7-6, EX7-17 Practices Exercises: EX7-5, EX7-24, EX7-25, P7-7 1
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Cash (coins, currency, money orders, certified cheques, personal cheques, bank drafts, petty cash funds) Standard medium of exchange Acceptable for deposit by bank Available to pay current obligations; free of contractual restrictions Reporting cash Restricted cash Disclose separately if material; current or noncurrent Cash in foreign currencies Translated into CAD$; separate from cash if restricted access Bank overdrafts Net against positive cash balances at same bank; if different bank, current liabilities Cash equivalents (Treasury bills, commercial papers, money market funds) Short term (<3 months), highly liquid investment Convertible with an insignificant risk of changes in value 2
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EX 7-2 1. Cash balance of $625,000. Only the chequing account balance should be reported as cash. The certificates of deposit of $1,100,000 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 $484,650 calculated as follows: Chequing account balance $500,000 Overdraft (17,000) Petty cash 300 Coin and currency 1,350 $484,650 Cash held in a bond sinking fund is restricted. Assuming that the bonds are noncurrent, the restricted cash is also reported as noncurrent. 3. Cash balance is $549,800 calculated as follows: Chequing account balance $540,000 Certified cheque from customer 9,800 $549,800 The postdated cheque of $11,000 should be reported as a receivable. Cash restricted due to compensating balance should be reported separately and classified as current or non- current (depending on the nature of the arrangement) and described in a note indicating the type of arrangement and amount. Postage stamps on hand are reported as part of office supplies or prepaid expenses. 4. Cash balance is $95,000calculated as follows: Chequing account balance $57,000 Money market mutual fund 38,000 $95,000 The NSF cheque received from customer should be reported as a receivable. 5. Cash balance is $700,900 calculated as follows: Chequing account balance $700,000 Cash restricted for future plant expansion of $500,000 should be reported as a noncurrent asset. The 60-day treasury bills of $180,000 should be reported as cash equivalents. Cash advance received from customer of $900 should also be reported as a liability; cash advance of $7,000 to company executive should be reported as a receivable; refundable deposit of $26,000 paid to federal government should be reported as a receivable. 3
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Petty Cash Cash fund on hand to pay for small items that might be needed for daily operations To establish a petty cash fund: Dr Petty cash xx Cr Cash xx To replenish the fund: Dr Expenses xx Cr Cash xx Example: EX 7-23 1. April 3 Petty Cash ........................................................... 250 Cash ........................................................ 250 2. April 13 Cash Over and Short ........................................... 2 Transportation-In ................................................ 60 Supplies Expense ................................................ 25 Postage Expense ................................................. 33 Receivables—Employees ................................... 17 Miscellaneous Expense ...................................... 36 Cash ........................................................ 173 3. April 20 Petty Cash ........................................................... 50 Cash ........................................................ 50 4
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Bank Reconciliation
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