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Determining cash balance

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Reference no: EM131092231

QUESTION1

(Determining Cash Balance) The controller for Clint Eastwood Co. is attempting to determine the amount of cash to be reported on its December 31, 2014, balance sheet. The following information is provided.

1. Commercial savings account of $600,000 and a commercial checking account balance of $900,000 are held at First National Bank of Yojimbo.

2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Eastwood to write checks on this balance, $5,000,000.

3. Travel advances of $180,000 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 $1,500,000 is restricted for the retirement of long-term debt.

5. Petty cash fund of $1,000.

6. An I.O.U. from Marianne Koch, a company customer, in the amount of $190,000.

7. A bank overdraft of $110,000 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 $500,000. These CDs have a maturity of 120 days.

9. Eastwood has received a check that is dated January 12, 2015, in the amount of $125,000.

10. Eastwood has agreed to maintain a cash balance of $500,000 at all times at First National Bank of Yojimbo to ensure future credit availability.

11. Eastwood has purchased $2,100,000 of commercial paper of Sergio Leone Co. which is due in 60 days.

12. Currency and coin on hand amounted to $7,700.

Instruction

(b) Indicate the proper reporting for items that are not reported as cash on the December 31, 2014, balance sheet. 

QUESTION 2

Suppose your firm buys $1,000 worth of supplies on credit with terms 3/15 n60.

a. If you pay the bill on the 14th day after the purchase, what is the cost of the trade credit you have used for the 14-day period?

b. If you pay the bill on the 50th day after the purchase, what is the cost of the trade credit you have used for the 35-day period after the discount period ended?

Reference no: EM131092231

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