Study Notes

1256 Words Jan 11th, 2012 6 Pages
E7-2 (Determine Cash Balance) Presented below are a number of independent situations. Instructions For each individual situation, determine the amount that should be reported as cash. If the item(s) is not reported as cash, explain the rationale. 1. Checking account balance $925,000; certificate of deposit $1,400,000; cash advance to subsidiary of $980,000; utility deposit paid to gas company $180. 2. Checking account balance $600,000; an overdraft in special checking account at same bank as normal checking account of $17,000; cash held in a bond sinking fund $200,000; petty cash fund $300; coins and currency on hand $1,350. 3. Checking account balance $590,000; postdated check from customer $11,000; cash restricted due to maintaining …show more content…
Short-term treasury bills of $180,000 should be reported as a temporary investment. Cash advance received from customer of $900 should also be reported as a liability; cash advance of $7,000 to company executive should be reported as a receivable; refundable deposit of $26,000 paid to federal government should be reported as a receivable.

13. FIFO, weighted average, and LIFO methods are often used instead of specific identification for inventory valuation purposes. Compare these methods with the specific identification method, discussing the theoretical propriety of each method in the determination of income and asset valuation.

The first-in, first-out method approximates the specific identification method when the physical flow of goods is on a FIFO basis. When the goods are subject to spoilage or deterioration, FIFO is particularly appropriate. In comparison to the specific identification method, an attractive as-pect of FIFO is the elimination of the danger of artificial determination of income by the selection
Open Document