Cash and Cash Equivalent - Reo vid

A stale check (drawn by others) should be debited to AR if the drawer has no liability to reissue one. (T/F)

False
- Debit to Loss

What is the difference between demand deposit and a saving's deposit?

Demand deposit - noninterest bearing
Savings deposit - interest bearing

When is a compensating balance part of cash?

If unrestricted

If bank overdraft is silent, it is part of cash. (T/F)

False
- Liability

2 exception when bank overdraft can be offset.

1. If 2 or more accounts in same bank

2. If immaterial

If a cash fund is maintained for asset acquisition, it is part of cash if the asset is noncurrent. (T/F)

False

If a cash fund is maintained for the payment of liability, it is part of cash if the liability is current. (T/F)

True

The following funds are being maintained, which is/are part of cash?

I. Interest Fund
II. Dividend and Payroll Fund
III. Tax Fund
IV. Pension Fund

a) I, II, III
b) I, II, IV
c) I, III, IV
d) All

A

Preference share redemption fund is part of cash equivalent. (T/F)

False
- Not part of CCE

The following cash fund are being maintained, which should be remove from cash account?

I. Pension Fund
II. Insurance Fund
III. Bond SInking Fund
IV. Preference Share Redemption Fund
V. Tax Fund

a) I, II, IV, V
b) I, IIII, IV, V
c) I, II, III, IV
d) All

C

It is a cash fund known to be set aside to defray relatively small amount of cash disbursements.

Petty Cash Fund

This are short-term and highly liquid investements are readily convertible into cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.

Cash Equivalents

Debt instruments acquired within 180 days or less before their maturity can qualify as cash equivalent. (T/F)

False
- 120 days (3 months)

If the acquisition date is not mentioned in the problem, the maturity date provided should be 3 months or less after the end of the reporting period. (T/F).

True

If no acquisition date and maturity date was provided, time deposit or certificate of deposit is assumed to be not part of cash equivalents. (T/F)

False
- Part of CE

If no acquisition date and maturity date was provided, Treasury Bill is assumed to be part of cash equivalents. (T/F)

True

If no acquisition date and maturity date was provided, Commercial Paper is assumed to be part not of cash equivalents. (T/F)

False
- Part of CE

If no acquisition date and maturity date was provided, Money Market Instrument is assumed to be not part of cash equivalents. (T/F)

False
- Part of CE

S1. Debt securities can be part of CCE
S2. Equity securities cannot be part of CCE.

a) S1 True
b) S2 False
c) All False
d) All True

A
S2 → redeemable preference share with mandatory redemption that is acquired within 3 months before redemption.

If a cash item is in closed bank or banks undergoing bankruptcy, it is measured at its estimated realizable value or recoverable value. (T/F)

True

An escrow deposit is part of cash. (T/F)

False

If a problem is silent, bank overdraft is current liability. (T/F)

True

If a bank overdraft exist, it can be offset to a different bank account provided the problem says it’s “integral”. (T/F)

True

Revolving fund is part of cash. (T/F)

True

Change fund is part of cash. (T/F)

True

If a petty cash fund is silent, the assumption is fluctuating system. (T/F)

False
- Imprest system (stricter system)

This consist of misappropriating a collection from one customer and concealing this defalcation when collection is made from another customer.

Lapping

Repurchase Agreement (RePos) is part of cash provided the maturity is 3 months or less upon acquisition. (T/F)

False
- Part of Cash Equivalent

Banker’s acceptance is classified as short term investment provided acquired less than 3 months before maturity. (T/F)

False
- CE