Star corp. had the following accounts and balances in its general ledger as of december 31:

petty cash $ 500
xyz bank checking account 20,000
marketable equity security 10,000
marketable debt security 7,500
abc bank depository account 5,000

what amount should star report as cash and cash equivalents in the balance sheet as of december 31?

=$ 25,500

Explanation:

cash equivalents will be petty cash + cash at bank

= 500+20,000+5000

=$ 25,500

Cash or cash equivalent refers to assets held in the form of cash or can easily convert into cash in less than 90 days. Examples of cash include petty cash, cash in hand, cash in the bank, and debt securities whose maturity is within 90 days. Cash or cash equivalent appears at the top on the list of assets in a balance sheet.

Marketable debt securities are short-term to bond issued by a corporation and held by another company. They are listed as a current asset if they are to be sold within one year to long term investment if they are expected to last longer. Marketable equity securities are capital instruments. They are listed as current assets if they are to be liquidated in one year or long term investment if longer.

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