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The following information is available for Birch Company at December 31:

Money market fund balance $2,790
Certificate of deposit maturing June 30 of next year $10,000
Postdated checks from customers $1,475
Cash in bank account $21,430
NSF checks from customers returned by bank $650
Cash in petty cash fund $200
Inventory of postage stamps $24
U.S. Treasury bill purchased on December 15 and maturing on February 28 of following year $5,000

Based on this information, Birch Company should report Cash and Cash Equivalents on December 31 of:

A $29,420
B $41,345
C $31,345
D $39,420
E $38,770

Respuesta :

Answer:

Cash and cash equivalents of $29,420,option A.

Explanation:

The amount of cash and cash equivalents Birch should report on December 31 is made up of the following:

Money market fund balance         $2790

Cash in bank account                    $21430

Cash in petty cash fund                 $200

U.S treasury bill                              $5000

Total cash and cash equivalents $29,420

Cash and cash equivalents are resources of the company that are readily amount of cash and those can could be easily converted to cash without significant portion of its value.

Money market fund is the fund set aside for trading in securities on a recognized exchange ,since securities being bought and sold are tradeable on stock exchange,the securities can be converted into cash in no distant time.

U.S treasury bills are viewed as cash equivalent if maturity is less than 3 months.

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