Question

Exercise 7-1 (Algo) Cash and cash equivalents; restricted cash [LO7-2] The controller of the Red Wing Corporation is in the process of preparing the company’s 2021 financial statements. She is trying to determine the correct balance of cash and cash equivalents to be reported as a current asset in the balance sheet. The following items are being considered: Balances in the company’s accounts at the First National Bank; checking $14,200, savings $22,800. Undeposited customer checks of $5,900. Currency and coins on hand of $650. Savings account at the East Bay Bank with a balance of $470,000. This account is being used to accumulate cash for future plant expansion (in 2023). $17,000 in a checking account at the East Bay Bank. The balance in the account represents a 10% compensating balance for a $170,000 loan with the bank. Red Wing may not withdraw the funds until the loan is due in 2024. U.S. Treasury bills; 2-month maturity bills totaling $22,000, and 7-month bills totaling $27,000. Required: 1. Determine the correct balance of cash and cash equivalents to be reported in the current asset section of the 2021 balance sheet.

Answer 1

Answer:

Explanation:

Cash and cash equivalents:

Balance in checking account 14,200

Balance in savings account 22,800

Undepoited customer checks 5,900

Currency and coins on hand 650

US Treasury bills 22,000

Total 65,550

*Red Wing may not withdraw the funds until the loan is due in 2024

*Part of Treasury bills mature in 7 month, hence not part of cash

* Savings account at the East Bay Bank is used to save money. Thus not included in calculation