FAR 3: M1-M8 (QUIZ 3) || A Verified A+ Pass.
Cook Co. had the following balances at December 31, Year 2:
Cash in checking account $350,000
Cash in money-market account $250,000
U.S. Treasury bill, purchased 12/1/Yr 2, maturing 2/28/Yr 3 $800,000
U.S. Treasury bond, purchased 3/1/Yr 2, maturing 2/28/Yr 3 $500,000
Cook's policy is to treat as cash equivalents all highly liquid investments with a maturity of 3
months or less when purchased. What amount should Cook report as cash and cash equivalents
in its December 31, Year 2, balance sheet?
A. $600,000
B. $1,150,000
C. $1,400,000
D. $1,900,000 correct answers C. $1,400,000 (350+250+800)
Imperial Food's checkbook balance on December 31, Year 1, was $122,400. In addition,
Imperial held the following items in its safe on December 31:
1. A check for $600 from Brewster Inc., received December 30, Year 1, which was not included
in the checkbook balance
2. A non-sufficient funds check from Star Company in the amount of $800 that had been
deposited at the bank, but was returned for lack of sufficient funds on December 29. The check
was to be redeposited on January 3, Year 2. The original deposit has been included in the
December 31 checkbook balance.
3. Coin and currency on hand amounted to $1,500.
The proper amount to be reported on Imperial Foods' balance sheet for cash at December 31,
Year 1:
A. $123,700
B. $122,800
C. $123,000
D. $122,400 correct answers A. $123,700 (122,400+600-800+1,500)
Inch Co. had the following balances at December 31, Year 1:
Cash in checking account $35,000
Cash in money market account $75,000
U.S. Treasury bill, purchased 12/1/Yr 1, maturing 2/28/Yr 2 $200,000
U.S. Treasury bill, purchased 12/1/Yr 0, maturing 5/31/Yr 2 $150,000
Inch's policy is to treat as cash equivalents all highly-liquid investments with a maturity of 3
months or less when purchased. What amount should Inch report as cash and cash equivalents in
its December 31, Year 1, balance sheet?
A. $460,000
B. $110,000
C. $235,000
D. $310,000 correct answers D. $310,000 (35+75+200)
,At December 31, Year 1, Kate 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
Kate classifies investments with original maturities of three months or less as cash equivalents.
In its December 31, Year 1, balance sheet, what amount should Kate report as cash and cash
equivalents?
A. $200,000
B. $240,000
C. $320,000
D. $190,000 correct answers B. $240,000 (175-10+25+50)
Trans Co. had the following balances at December 31, Year 1:
Cash in checking account $35,000
Cash in money market account $75,000
U.S. Treasury bill, purchased 11/1/Year 1, maturing 1/31/Year 2 $350,000
U.S. Treasury bill, purchased 12/1/Year 1, maturing 3/31/Year 2 $400,000
Trans' policy is to treat as cash equivalents all highly-liquid investments with a maturity of 3
months or less when purchased. What amount should Trans report as cash and cash equivalents
in its December 31, Year 1, balance sheet?
A. $385,000
B. $860,000
C. $110,000
D. $460,000 correct answers D. $460,000 (35+75+350)
Star Corp. had the following accounts and balances in its general ledger as of December 31:
Petty cash $500
XYZ Bank -- checking account $20,000
Marketable equity security $10,000
Marketable debt security $7,500
ABC Bank -- depository account $5,000
What amount should Star report as cash and cash equivalents in the balance sheet as of
December 31?
A. $25,500
B. $25,000
C. $35,000
D. $42,500 correct answers A. $25,500 (Checking accts, depository accts, & petty cash;
marketable equity/debt are investments)
Core Properties, Inc. holds the following working capital items as of December 31, Year 1:
-Bank draft in the amount of $9,000 from a German customer
-$10,000 six-month Treasury bill maturing February 15, Year 2, purchased on the issuance date.
-$20,000 one-year certificate of deposit maturing on January 15, Year 2.
,Core includes in cash equivalents all possible items. On Core's December 31, Year 1 balance
sheet, cash and cash equivalents is:
A. $9,000
B. $19,000
C. $39,000
D. $30,000 correct answers A. $9,000 (Treasury bill & CD have original maturities greater than
90 days)
Rune Co.'s checkbook balance on December 31 was $10,000. On that date, Rune held the
following items in its safe:
$4,000 check payable to Rune, postdated January 3, and not included in the December 31
checkbook balance, in collection of a sale made in December.
$1,000 check payable to Rune, deposited December 15 and included in the December 31
checkbook balance, but returned by the bank on December 30 stamped "NSF." The check was
redeposited on January 2, and cleared on January 9.
What amount should Rune report as cash in its December 31 balance sheet?
A. $10,000
B. $9,000
C. $14,000
D. $13,000 correct answers B. $9,000 (10,000-1,000; $4000 check payable is postdated after
year-end & NSF was returned by Dec 30th)
The following are held by Smite Co.
Cash in checking account $20,000
Cash in bond sinking fund account $30,000
Post-dated check from the customer dated on month from balance sheet date $250
Petty Cash $200
Commercial paper (matures in two months) $7,000
Certified of deposit (matures in six months) $5,000
What amount should be reported as cash and cash equivalents on Smite's balance sheet?
A. $27,200
B. $27,450
C. $32,200
D. $57,200 correct answers A. $27,200 (unrestricted: 20,000+200+7,000; bond sinking fund is a
restricted cash)
Hilltop Co.'s monthly bank statement shows a balance of $54,200. Reconciliation of the
statement with company books reveals the following information:
Bank service charge $10
Insufficient funds check $650
Checks outstanding $1,500
Deposits in transit $350
Check deposited by Hilltop and cleared by the bank for $125, but improperly recorded by Hilltop
as $152
What is the net cash balance after the reconciliation?
A. $53,050
, B. $53,023
C. $53,077
D. $52,363 correct answers A. $53,050 (54,200+350-1,500) Balance per the bank statement are
deposits in transits & outstanding checks
The following information pertains to Grey Co. at December 31, Year 1:
Checkbook balance $12,000
Bank statement balance $16,000
Check drawn on Grey's account, payable to a vendor, dated and recorded 12/31/Year 1 but not
mailed until 1/10/Year 2 $1,800
On Grey's December 31, Year 1, balance sheet, what amount should be reported as cash?
A. $14,200
B. $16,000
C. $12,000
D. $13,800 correct answers D. $13,800 (Since the check is not disbursed as of year end, it should
be added back to the balance 12,000 + 1,800)
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?
A. $148,000
B. $151,000
C. $155,000
D. $156,000 correct answers C. $155,000 (The overdraft from the small bank is reported as a
current liability)
On December 31, a company has the following bank accounts and corresponding cash balances:
Cali Bank
Operating-Summit Ridge ($400,000)
Operating-Bakersville $300,000
Operating-Smithville $50,000
Savings $500,000
Sedona Bank
checking ($375,000)
How should the company report the above bank account balances in the balance sheet at
December 31?
