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

Cash in bank account $8,540
Petty cash $250
Money market fund balance $10,400
Checks from customers $1,350
NSF checks from customers returned by bank $805
Treasury bill maturing in 60 days $10,000
Money orders $290
A nine-month certificate of deposit maturing on March 31 of next year $6,000

Based on this information, the amounts considered Cash and Cash Equivalents, respectively on December 31 are:

On December 31

Cash $10,430

Cash Equivalent $27,205

Explanation:

Cash includes all the currencies in hand or any asset which could be converted to cash instantly.

The assets with high liquidity is included in cash and cash equivalent balance. These assets can be converted into cash very quickly. These assets normally have 90 days or fewer maturity period.

Answer and Explanation:

Cash in bank                          $8,540

Petty cash                               $250

Check from customer            $1,350

money order                           $290

Cash                                       $10,430

The check will be clear with 3 to 4 working days, so it has very short maturity period.

Money order can be collected instantly.

Cash = $10,430

Cash Equivalent

Money market fund balance                               $10,400

Treasury bill maturing in 60 days                       $10,000

NSF checks from customers returned by bank $805

Certificate of deposit                                           $6,000  

Total Cash Equivalent                                          $27,205

Money Market fund balance normally has maturity of 60 or less.

Checks returned by bank can be recollected from customer in a short period.

CD is Maturing in 90 days from December 31.

Cash = $10,430

Cash Equivalents = $27,205

Explanation:

Cash are liquid asset which include cash, checks, and money orders that are payment order for a pre-specified amount of money.  

Cash equivalents are items that can easily be converted to cash instantly, and they include NSF checks from customers returned by bank, marketable securities like short-term government bonds and commercial paper.

Based on these, the amounts considered Cash and Cash Equivalents, respectively on December 31 can be calculated as follows:

Cash = Cash in bank account + Petty cash + Checks from customers + Money orders

         = $8,540 + $250 + $1,350 + $290  

Cash = $10,430

Cash equivalents = Money market fund balance + NSF checks from customers returned by bank + Treasury bill maturing in 60 days + A nine-month certificate of deposit maturing on June 30 of next year

Cash equivalents = $10,400 + $805 + $10,000 + $6,000 = $27,205

Therefore, the amounts considered Cash and Cash Equivalents, respectively on December 31 are $10,430 and $27,205.

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