Reference no: EM132745975

Problem 1: If a company is required by a bank to have a compensating cash balance for a short-term loan, the compensating balance should be disclosed as a

a. deduction from the related liability

b. note to the financial statements describing the restriction of the cash balance

c. liability

d. contra-asset deducted from the cash balance

Problem 2: At October 31, 2019, Patrick Co. had cash accounts at three different banks. One account balance is segregated solely for a November 15, 2022 payment into a bond sinking fund. A second account, used for branch operations, is overdrawn. The third account, used for regular corporate operations, has a positive balance. How should these accounts be reported in Patrick's October 31, 2019 statement of financial position?

a. the segregated account should be reported as a noncurrent asset, the regular account should be reported as current asset, and the overdraft should be reported as a current a liability.

b. the segregated and the regular account should be reported as current assets and the overdraft should be reported as a current liability

c. the segregated account should be reported as a noncurrent asset, and the regular account should be reported as current net of overdraft

d. the segregated and regular accounts should be reported as current assets net of overdraft.