Cash and Cash Equivalents
Cash and Cash Equivalents
Cash and Cash Equivalents
Postage 50,000
What is the correct amount of cash and cash equivalents that will appear as a
current asset on Ester Co.’s balance sheet?
a. P6,050,000
b. P6,150,000
c. P6,225,000
d. P6,275,000
2. The books of ABC Co. show the following balances at December 31, 20x1:
Cash on hand ₱ 400,000
Cash in Bank – current account 1,200,000
Cash in Bank – peso savings deposit 5,000,000
Cash in Bank – dollar deposit (unrestricted) $ 100,000
Cash in Bank – dollar deposit (restricted) 250,000
Cash in 3-month money-market account ₱ 500,000
3-month unrestricted time deposit $ 20,000
Treasury bill, purchased 11/1/20x1, maturing ₱1,600,000
2/14/20x2
Treasury bond, purchased 3/1/20x1, maturing 1,000,000
2/28/20x2
Treasury note, purchased 12/1/20x1, maturing 400,000
2/28/20x2
Unused Credit Line 4,000,000
Redeemable preference shares, purchased 740,000
12/1/20x1,
due on 3/1/20x2
Treasury shares, purchased 12/1/20x1, to be 200,000
reissued on
1/5/20x2
Sinking fund 400,000
Additional information:
● Cash on hand includes a ₱40,000 check payable to ABC Co. dated December
29, 20x1.
● During December 20x0, check amounting to ₱30,000 was drawn against the
Cash in bank - current account in payment of accounts payable. The check
remains outstanding as of December 31, 20x1.
● The Cash in Bank – peso savings deposit includes ₱800,000 security bond on a
pending labor litigation, in favor of a previous employee. The establishment
of the bond is mandated by a court of law.
● The Cash in Bank – peso savings deposit also includes a compensating balance
amounting to ₱500,000 which is not legally restricted.
● The Cash in Bank – dollar deposit (unrestricted) account includes interest of
$4,000, net of tax, directly credited to ABC Co.’s account. The exchange rate
at year-end is $1 is to ₱45.
How much is the cash and cash equivalents to be reported in the 20x1 financial
statements?
a. 14,720,000
b. 19,520,000
c. 12,430,000
d. 12,870,000
1. Company’s
6,150,000
A. Commercial Paper Maturing in Four Months
Would not qualify Cash Equivalents (PAS 7.6)
- Short term
- Highly liquid investments
- That are readily convertible to known amounts of cash
- Which are subject to an insignificant risk of changes in value
Only debt instruments acquired within 3 months or less before their
maturity date can qualify as cash equivalents.
- Treasury bills, notes or bonds acquired within 3 months or less before their
maturity date
-3 month-time deposit
B. Certificates of Deposit
Only debt instruments acquired within 3 months or less before their maturity
date can qualify as cash equivalents.
2. ABC Co
Cash on hand 400,000
Cash in Bank – current account 1,200,000
Cash in Bank – peso savings deposit (5,000,000 less 4,200,000
800,000 restriction)
Cash in Bank – dollar deposit (unrestricted) (100,000 4,500,000
x 45)
Cash in 3-month money-market account 500,000
3-month unrestricted time deposit (20,000 x45) 900,000
Treasury note, purchased 12/1/20x1, maturing 400,000
2/28/20x2
Redeemable preference shares, purchased 740,000
12/1/20x1, due on 3/1/20x2
Outstanding check 30,000
12,870,000