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In connection with your audit of Big Brother Corp
In connection with your audit of Big Brother Corp. for the year ended December 31, 2014, you gathered the following information: Current account at Bank of the Philippine Islands P6,000,000 Current account at Equitable PCI Bank (300,000) Payroll account 1,500,000 Foreign bank account - restricted in USD)" 60,000 Postage stamps 3,000 Employee's post-dated check 12.000 IOU from a key officer 30,000 Credit memo from a vendor for a purchase retum 60,000 Traveler's check 150,000 Customer's not-sufficient-funds check 45.000 Money orders 90,000 Petty cash fund (P12,000 in currency and expense vouchers for P17,500) 30,000 Treasury bills, due 3/31/15 (purchased 12/31/14) 600,000 Treasury bills, due 1/31/15 (purchased 1/1/14) 900.000 Change fund 10,000 Bond sinking fund 1,000,000 "current exchange rate as of December 31, 2014 is at P50 for every USD1. What is the total cash and cash equivalent to be reported by the company in its December 31, 2014 balance sheet?
Expert Solution
Cash and Cash equivalents refer to the currents assets of the company that are in Cash, Bank or can be converted into cash immediately on a short notice. They are held by the company to ensure liquidity in times of need.
Any bank account which is restricted, any security which is long term, any fund which is strictly to be used for a specific purpose or any other asset which can not be converted to cash easily and immediately will not form a part of Cash and Cash equivalents for balance sheet purpose.
Step 2
Hence, in the give case, following would be a part of cash and cash equivalents:
|
Particulars |
Amount |
|
1. Current Account at bank of Philippine Islands |
6,000,000 |
|
2. Payroll Account |
1,500,000 |
|
3. Traveller’s Check |
150,000 |
|
4. Money Orders |
90,000 |
|
5. Petty Cash funds (only the currency amount) |
12,000 |
|
6. Treasury bills due on 3/31/15 |
600,000 |
|
7. Change fund |
10,000 |
|
Total |
8,362,000 |
The other items do not form a part of the cash and cash equivalents since they are either restricted, or long term or can not be converted into cash immediately.
Hence, total cash and cash equivalents as of 31st December, 2014 is P8,362,000
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