Cash & Cash Equivalents

Question 1

How should regular, segregated, and overdrawn bank accounts be reported on the balance sheet?

Answer 1

Segregated account - non-current asset
Regular account - current asset
Overdraft - current liability

Question 2

Cash on hand and in banks in included in:

Answer 2

“Cash and cash equivalents” because it is both unrestricted and readily available.

Question 3

The effective interest rate on borrowings is:

Answer 3

The net annual interest cost divided by the net available proceeds from the borrowing.

Question 4

To be classified as cash, an item must:

Answer 4

be readily available for current needs with no legal restrictions limiting its use.

Note that a post-dated check is NOT readily available, therefore it is not considered cash.

Question 5

Current assets are:

Answer 5

those assets expected to be consumed or realized in cash within one year of the balance sheet date.

Question 6

Cash and cash equivalents include:

Answer 6

Petty cash and cash in bank accounts.