Exercise 7-1 (Algo) Cash and cash equivalents; restricted cash; financial statement effects [LO7-2] The controller of the Red Wing Corporation is in the process of preparing the company’s 2024 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 $15,500, savings $24,100. Undeposited customer checks of $7,200. Currency and coins on hand of $780. Savings account at the East Bay Bank with a balance of $600,000. This account is being used to accumulate cash for future plant expansion (in 2026). $45,000 in a checking account at the East Bay Bank. The balance in the account represents a 15% compensating balance for a $300,000 loan with the bank. Red Wing may not withdraw the funds until the loan is due in 2027. U.S. Treasury bills; 2-month maturity bills totaling $35,000, and 7-month bills totaling $40,000. Required: Determine the correct balance of cash and cash equivalents to be reported in the current asset section of the 2024 balance sheet. For each of the items not included in your answer to requirement 1, select the correct classification of the item.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Exercise 7-1 (Algo) Cash and cash equivalents; restricted cash; financial statement effects [LO7-2] The controller of the Red Wing Corporation is in the process of preparing the company’s 2024 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 $15,500, savings $24,100. Undeposited customer checks of $7,200. Currency and coins on hand of $780. Savings account at the East Bay Bank with a balance of $600,000. This account is being used to accumulate cash for future plant expansion (in 2026). $45,000 in a checking account at the East Bay Bank. The balance in the account represents a 15% compensating balance for a $300,000 loan with the bank. Red Wing may not withdraw the funds until the loan is due in 2027. U.S. Treasury bills; 2-month maturity bills totaling $35,000, and 7-month bills totaling $40,000. Required: Determine the correct balance of cash and cash equivalents to be reported in the current asset section of the 2024 balance sheet. For each of the items not included in your answer to requirement 1, select the correct classification of the item.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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