ch07HWSolutionsPlus - CHAPTER 7 Cash and Receivables...

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CHAPTER 7 Cash and Receivables SOLUTIONS TO EXERCISES EXERCISE 7-1 (a) Cash includes the following: 1. Commercial savings account— First National Bank of Olathe. .................................. $ 600,000 1. Commercial checking account— First National Bank of Olathe. .................................. 800,000 2. Money market fund—Volonte. ..................................... 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, 2010, balance sheet. ...... $8,508,700 (b) Other items classified as follows: 3. Travel advances (reimbursed by employee)* should be reported as receivable—employee 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 identi- fied 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 $150,000. 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.
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EXERCISE 7-1 (Continued) 9. Postdated check of $125,000 should be reported as an accounts receivable. 10. The compensating balance requirement does not affect the bal- ance 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 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 $484,650 computed as follows: Checking 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.
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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
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This note was uploaded on 06/28/2011 for the course ACCOUNTING 515 taught by Professor Jim during the Spring '11 term at CUNY Queens.

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ch07HWSolutionsPlus - CHAPTER 7 Cash and Receivables...

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