INTERMEDIATE

ACCOUNTING
PROBLEM 1-17
PROBLEM 1-17
 Baloney company had the following account balance as December
31, 2021:

Cash in bank 2,250,000

CASH ON HAND 125,000
CASH RESTRICTED FOR 1,600,000
ADDITION TO PLAINT
IN JANUARY 2022

CASH IN BANK INCLUDED P600,000 OF COMPENSATING BALANCE AGAINST SHORT-TERM

BORROWRING ARANGEMENT.

THIS COMPENSATING BALANCE IS NOT LEGALLY RESTRICTED AS TO WIITHDRAWAL

 QUESTION
WHAT TOTAL AMOUNT SHOULD BE REPORTED AS CASH ON DECEMBER
31, 2022?
 CHOICES
A. 1,775,000 C. 2,375,000

B. 2,250,000 D. 3,975,000
 ANSWER
C. 2,375,000
EXPLANATION:
CASH ON HAND (125,000) AND CASH IN BANK (2,250,000) ARE BOTH REPORTED AS CASH
IN THE CURRENT ASSET SECTION OF THE BALANCE SHEET BECAUSE THEY ARE BOTH
UNRESTRICTED AND READILY AVAILABLE FOR USE. CASH LEGALLY RESTRICTED FOR
ADDITIONS TO PLANT (1,600,000) IS NOT AVAILABLE TO MEET CURRENT OPERATING
NEEDS, AND THEREFORE SHOULD BE EXCLUDED FROM CURRENT ASSETS. INSTEAD,
IT SHOULD BE SHOW IN LONG-TERM ASSET SECTION OF THE BALANCE SHEET AS AN
INVESTMENT.
thank you &
goodluck
future cpa!!