Question

At October 31, Dingo, Inc. had cash accounts at three different banks. One account balance is segregated solely for a November 15 payment into a bond sinking fund. A second account, used for branch operations, is overdrawn. The third account, used for regular corporate operations, has a positive balance. How should these accounts be reported in Dingo's October 31 classified balance shee

Answer 1

Answer: A. The segregated account should be reported as a noncurrent asset, the regular account should be reported as a current asset, and the overdraft should be reported as a current liability.

Explanation:

The segregated account is scheduled to pay funds into a bond sinking fund which is a long term fund. The segregated account should therefore be considered a noncurrent account due to the bond sinking fund being long term.

The regular account is used for regular corporate operations which makes it current and has a positive balance which makes it an asset therefore it is best as a current asset.

The account that is overdrawn represents a liability albeit a short term one as bank overdrafts do not typically last longer than a year so this is a current liability.