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need answer with explanation Sleepy Time Baby Clothes maintains its corporate checking account at BUY Bank. Sleepy Time also has a $50,000 line of credit
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Sleepy Time Baby Clothes maintains its corporate checking account at BUY Bank. Sleepy Time also has a $50,000 line of credit at BUY Bank, for which Sleepy Time maintains a compensating balance of $10,000 in its checking account. Sleepy Time had $45,000 outstanding on the line at December 31, 20X4. The requirement to keep a $10,000 compensating balance in its checking account was not a part of the loan agreement that Sleepy Time signed for the line of credit. However, the company's loan officer at BUY Bank monitors its checking account balance and if the balance falls below $10,000, the loan officer calls Sleepy Time. On December 31, 20X4, the balance in Sleepy Time's checking account was $12,000 according to the company's general ledger. Sleepy Time's accounts receivable department had recorded several customer payments received in the customers' accounts in the accounting system, but as of December 31 had not yet deposited the checks at BUY Bank. The total of the checks received and posted but not yet deposited was $2,000 at December 31, 20X4. What cash balance should Sleepy Time report on its balance sheet for December 31, 20X4? . . A. $14,000 B. $12,000correct C. zero D. $47,000Step by Step Solution
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