Chapter 07 - Homework Solutions

Chapter 07 - Homework Solutions - CHAPTER 7 Cash and...

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Unformatted text preview: CHAPTER 7 Cash and Receivables SOLUTIONS TO EXERCISES EXERCISE 7-1 (1015 minutes) (a) Cash includes the following: 1. Commercial savings account First National Bank of Yojimbo $ 600,000 1. Commercial checking account First National Bank of Yojimbo 900,000 2. Money market fundVolonte 5,000,000 5. Petty cash 1,000 11. Commercial Paper (cash equivalent) 2,100,000 12. Currency and coin on hand 7,700 Cash reported on December 31, 2007, balance sheet $8,608,700 (b) Other items classified as follows: 3. Travel advances (reimbursed by employee)* should be reported as receivableemployee in the amount of $180,000. 4. Cash restricted in the amount of $1,500,000 for the retirement of long-term debt should be reported as a noncurrent asset identified as Cash restricted for retirement of long-term debt. 6. An IOU from Marianne Koch should be reported as a receivable in the amount of $190,000. 7. The bank overdraft of $110,000 should be reported as a current liability.** 8. Certificates of deposits of $500,000 each should be classified as temporary investments. 9. Postdated check of $125,000 should be reported as an accounts receivable. EXERCISE 7-1 (Continued) 10. The compensating balance requirement does not affect the balance in cash. A note disclosure indicating the arrangement and the amounts involved should be described in the notes. *If not reimbursed, charge to prepaid expense. **If cash is present in another account in the same bank on which the overdraft occurred, offsetting is required. EXERCISE 7-2 (1015 minutes) 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 cash 300 Coin and currency 1,350 $584,650 Cash held in a bond sinking fund is restricted. Assuming that the bonds are noncurrent, the restricted cash is also reported as noncurrent. EXERCISE 7-2 (Continued) 3. Cash balance is $599,800 computed as follows: Checking account balance $590,000 Certified check from customer 9,800 $599,800 The postdated check of $11,000 should be reported as a receivable. Cash restricted due to compensating balance should be described in a note indicating the type of arrangement and amount. Postage stamps on hand are reported as part of office supplies inventory or prepaid expenses. 4. Cash balance is $85,000 computed as follows: Checking account balance $37,000 Money market mutual fund 48,000 $85,000 The NSF check received from customer should be reported as a receivable....
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This note was uploaded on 01/20/2011 for the course ACC 301 taught by Professor Staff during the Fall '08 term at Kentucky.

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Chapter 07 - Homework Solutions - CHAPTER 7 Cash and...

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