Need some help:
Question 1-
At December 31, Year 1, Kale Co. had the following balances in the accounts it maintains at First State Bank:
Checking account #101 $ 175,000
Checking account #201 (10,000)
Money market account 25,000
90-day certificate of deposit, due 2/28/Year 2 50,000
180-day certificate of deposit, due 3/15/Year 2 80,000
Kale classifies investments with original maturities of three months or less as cash equivalents. In its December 31, Year 1, balance sheet, what amount should Kale report as cash and cash equivalents?
Correct answer-
d.
$240,000
Question 2-
Smith Co. has a checking account at Small Bank and an interest-bearing savings account at Big Bank. On December 31, Year 1, the bank reconciliations for Smith are as follows:
Big Bank
Bank balance $150,000
Deposit in transit 5,000
Book balance 155,000
Small Bank
Bank balance $1,500
Outstanding checks (8,500)
Book balance (7,000)
What amount should be classified as cash on Smith's balance sheet at December 31, Year 1?
Correct answer
a.
$155,000
How come in question 1- the assets include the negative bank account but not in question 2?
AUD 7/30/12 73; 12/2/13 85
BEC 7/19/13 81
REG 8/2/14 83
FAR - Jan 2015
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