Question

The controller for Clint Swifty Co. is attempting to determine the amount of cash to be reported on its December 31, 2020, balance sheet. The following information is provided.

1. Commercial savings account of $690,500 and a commercial checking account balance of $812,900 are held at First National Bank of Yojimbo.

2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Swifty to write checks on this balance, $5,228,200. 3. Travel advances of $194,800 for executive travel for the first quarter of next year (employee to reimburse through salary reduction).

4. A separate cash fund in the amount of $1,493,000 is restricted for the retirement of long-term debt.

5. Petty cash fund of $1,750.

6. An I.O.U. from Marianne Koch, a company customer, in the amount of $166,700.

7. A bank overdraft of $116,700 has occurred at one of the banks the company uses to deposit its cash receipts. At the present time, the company has no deposits at this bank.

8. The company has two certificates of deposit, each totaling $537,300. These CDs have a maturity of 120 days.

9. Swifty has received a check that is dated January 12, 2021, in the amount of $131,320.

10. Swifty has agreed to maintain a cash balance of $514,800 at all times at First National Bank of Yojimbo to ensure future credit availability.

11. Swifty has purchased $2,005,100 of commercial paper of Sergio Leone Co. which is due in 60 days.

12. Currency and coin on hand amounted to $7,949. (a) Compute the amount of cash and cash equivalents to be reported on Swifty Co.’s balance sheet at December 31, 2020.

The amount of Cash and Cash Equivalents reported on December 31, 2020 $

Answer 1

We will answer line by line what is to be included in Cash and Cash Equivalents and what not.
1. Commercial savings account of $690,500 and a commercial checking account balance of $812,900 are held at First National Bank of Yojimbo.
Include 690500 and 812900 as these are easily accessible

2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Swifty to write checks on this balance, $5,228,200.
Include Money market fund $5,228,200,

3. Travel advances of $194,800 for executive travel for the first quarter of next year (employee to reimburse through salary reduction).
Exclude travel Advances $194,800 as these shall be reported as Advances

4. A separate cash fund in the amount of $1,493,000 is restricted for the retirement of long-term debt.
Exclude Restricted Cash fund as these are not readily accessible

5. Petty cash fund of $1,750.
Include petty Cash fund $1750

6. An I.O.U. from Marianne Koch, a company customer, in the amount of $166,700.
These $166700 are Receivables not cash and cash quivalents hence exclude

7. A bank overdraft of $116,700 has occurred at one of the banks the company uses to deposit its cash receipts. At the present time, the company has no deposits at this bank.
Bank overdraft without deposits in short term loan , hence exclude from Cash and Cash Equivalents

8. The company has two certificates of deposit, each totaling $537,300. These CDs have a maturity of 120 days.
Include $537300 in Cash and Cash Equivalents as these have a maturity of less than one year

9. Swifty has received a check that is dated January 12, 2021, in the amount of $131,320.
The amount of $ 131320 shall be reported as cheques on hand under current assets hence exclude from Cash and Cash Equivalents

10. Swifty has agreed to maintain a cash balance of $514,800 at all times at First National Bank of Yojimbo to ensure future credit availability.
Include as $ 514800 is still accesible easily even after a promise to the bank to maintain the funds for future credit availability.

11. Swifty has purchased $2,005,100 of commercial paper of Sergio Leone Co. which is due in 60 days.
The commercial paper are due in 60 days hence include in Cash and Cash Equivalents

12. Currency and coin on hand amounted to $7,949
Include $ 7949
The amount of Cash and Cash Equivalents reported on December 31, 2020
690500+812900+5228200+1750+537300+514800+2005100+7949
=9,798,499