Reference no: EM133008295

Problem 1: Which item should be excluded from cash and cash equivalents?

a. The minimum cash balance in the entity's current account which is maintained to avoid service charges.

b. A check issued by the entity on December 27 of the current year but dated January 15 of next year.

c. Time deposit which matures in one year.

d. A customer's check denominated in a foreign currency.

Problem 2: At the end of the current year, an entity had cash accounts at three banks. One account is segregated solely for 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?

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

b. The segregated and regular accounts 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 a current asset net of the overdraft.

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