E7.1 (LO 2) Excel (Determining Cash Balance) The controller for Fashion Co. is trying to de termine the amount of cash to report on the December 31, 2020 statement of financial position. The following information is provided: 1. A commercial savings account with $600,000 and a commercial chequing account balance of $900,000 are held at First National Bank. There is also a bank overdraft of $35,000 in a chequing account at the Royal Scotia Bank. No other accounts are held at the Royal Scotia Bank. 2. Fashion has agreed to maintain a cash balance of $100,000 at all times in its chequing account at First National Bank to ensure that credit is available in the future. 3. Fashion has a $5-million investment in a Commercial Bank of Montreal money-market mutual fund. This fund has chequing account privileges. 4. There are travel advances of $18,000 for executive travel for the first quarter of next year. (Employees will complete expense reports after they travel.) 5. A separate cash fund in the amount of $1.5 million is restricted for the retirement of long-term debt. 6. There is a petty cash fund of $3,000. 7. A $1,900 IOU from Marianne Koch, a company officer, will be withheld from her salary in January 2021. 8. There are 20 cash floats for retail operation cash registers: 8 at $475, and 12 at $600. 9. The company has two certificates of deposit, each for $500,000. These certificates of deposit each had a maturity of 120 days when they were acquired. One was purchased on October 15 and the other on December 27. 10. Fashion has received a cheque dated January 12, 2021, in the amount of $25,000 from a customer owing funds at December 31. It has also received a cheque dated January 8, 2021, in the amount of $11,500 from a customer as an advance on an order that was placed on December 29 and will be delivered February 1, 2021. 11. Fashion holds $2.1 million of commercial paper of Rocco Leone Co., which is due in 60 days. 12. Currency and coin on hand amounted to $7,700. 13. Fashion acquired 1,000 shares of Sortel for $3.90 per share in late November and is holding them for trading. The shares are still on hand at year end and have a fair value of $4.10 per share on December 31, 2020. Instructions a. Calculate the amount of cash to be reported on Fashion's SFP at December 31, 2020. b. Show the proper way to report items that are not reported as cash on the December 31, 2020 SFP. c. Referring to item 2 above, why would First National Bank require Fashion to maintain a cash bal- ance of $100,000 at all times in its chequing account? d. Digging Deeper From the perspective of a potential lender to Fashion, discuss the importance of proper reporting of item 5
