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E7-14 Nayak Company

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E7-14 Nayak Company has recorded the following items in its fi nancial records.

Cash in bank  41,000
Cash in plant expansion fund  100,000
cash on hand  8,000
Highly liquid investments  34,000
Petty cash  500
Receivables from customers  89,000
Stock investments  61,000

The cash in bank is subject to a compensating balance of $5,000. The highly liquid investments
had maturities of 3 months or less when they were purchased. The stock investments
will be sold in the next 6 to 12 months. The plant expansion project will begin in
3 years.

(a) What amount should Nayak report as “Cash and cash equivalents” on its balance
(b) Where should the items not included in part (a) be reported on the balance sheet?
(c) What disclosures should Nayak make in its fi nancial statements concerning “cash and
cash equivalents”?

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