In what accounts should the following items be classified? (a) Coins and currency. (b) U.S. Treasury (government) bonds. (c) Certificate of deposit (matures in 5 months). (d) Cash in a bank that is in receivership. (e) NSF check (returned with bank statement). (f) Deposit in foreign bank (exchangeability limited). (g) Postdated checks. (h) Cash to be used for retirement of long-term bonds. (i) Deposits in transit. (j) 100 shares of HP stock (intention is to sell in one year or less). (k) Savings and checking accounts. (l) Petty cash. (m) Stamps. (n) Travel advances.

Items

Classification

Explanation

a

Cash

Coins and currency are considered cash commodities because they are not unrestricted.

b

Trading securities

U.S. Treasury bonds are considered trading securities because they are used to control financial activities.

c

Temporary investment

Certificate of Deposit issued for only 5 months is considered as a temporary investment as it invests for a shorter duration.

d

Receivable

Cash in a bank that is in receivership is a transaction that is considered receivable from the bank.

e

Receivable

NSF check is a transaction that is considered to be receivable from the bank.

f

Other assets

Deposits in a foreign bank where exchange capacity is limited are treated like other assets like investments.

g

Receivable

A post-dated check is considered receivable because it is considered collectible.

h

Investment

The cash used for the retirement of long-term bonds is treated as an investment to settle the bonds.

i

Cash

Deposits in transit are considered cash because it is the amount of cash that is yet to be processed by the bank.

j

Trading securities

Stocks are considered to be trading securities as these stocks are for a short duration of 3 to 12 months.

K

Cash

Savings and checking accounts are considered cash items because they are unrestricted items.

l

Cash

Petty cash is considered a cash item because it is an unrestricted item.

m

Prepaid expenses

Stamps are considered a prepaid expense or are also treated as an office supply inventory.

n

Receivable

Travel advances are considered receivable as they can be collected from employees through deduction of salaries.