Question

Cash is a monetary and financial asset. It is the most liquid finance asset; it is also the standard medium of exchange for most business transactions. Cash is usually classified as a current account, however there are circumstances in which cash is classified as a non-current asset. Required: With the aid of a suitable example, explain when can be classified as a non-current asset.

B. Study the following items related to transactions during the year to September 30, 2020 for Thompson’s Tours’ Inc. All transactions are reported on the financial statements in $XCD.

I. A bank overdraft of $200,000 in a chequing account at St Kitts National Bank.

II. A saving account with a balance of $400,000 at Open Campus Bank and chequing account with an overdraft of $100,000 at the same bank repayable on demand.

III. The Operation Manager was given a salary advance of $2,000 on August 24, 2020 and this amount was deducted from his October salary.

IV. CAD$3,045 on hand from tips up to March 31, 2020, its pre-COVID operations when the exchange rate was CAD$1 = $2.01 XCD. On September 30, 2020, the exchange rate was CAD$1 = $1.95 XCD

V. Special Edition Independence postage stamps on hand valued at $200.

VI. Cash holdings of US$100,000, the exchange rate on September 30, 2020 is $2.70.

VII. Petty cash on hand valued at $1,500.

VIII. A cheque in the amount of $5,000 and dated October 23, 2020 was received from a customer on September 27, 2020.

IX. Short term 60 days treasury bill valued at $35,000.

X. Thompson’s Tours’ Inc. invested $1,000,000 in a money market fund with Mona Campus Bank on July 10, 2020 which will mature on October 9, 2020.

Required:

a. List all items from above that would NOT be classified as cash or cash equivalents in the current asset section of Thompson’s Tours’ Inc. Statement of Financial Position as at September 30, 2020? State how each of these items would then be classified in the financials.

b) . Using the information in B above, calculate the cash and cash equivalent value that would appear in Thompson’s Tours’ Inc. Statement of Financial Position on September 30,2020

Answer 1

Item which shall not form part of cash and cash equivalents

i) Bank overdraft shall not be part of cash and cash equivalents, it shall be shown as financial liability under current liability

iii) The salary advance not be part of cash and cash equivalents,, it shall be shown in other financial asset under current asset

viii) Postdated check should not be reported as part of the Cash account balance until the date of the check. It shall be shown in PDC receivable in other current assets

b)

	Amount
ii) Saving Account	400,000
iv) CAD (3045*1.95)	5,938
v) Postage Stamps	200
vi) USD	270,000
vi) Petty Cash	1,500
ix) Short term treasury bills	35,000
x)Money Market fund	1,000,000
Total	1,712,638