At October 31, 1992, Dingo, Inc. had cash accounts at three different banks. One account balance is segregated solely for a November 15, 1992, 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, 1992, classified balance

sheet?

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.

b.    The segregated and regular accounts should be reported as current assets, and the overdraft should be reported as a current liability.

c. The segregated account should be reported as a noncurrent asset, and the   regular account should be reported as a current asset net of the overdraft.

d. The segregated and regular accounts should be reported as current assets net of the overdraft.

Choice "a" is correct. The segregated bank account (at bank #1) to be used to pay a current maturity of a long-term bond sinking fund debt should be classified as a noncurrent asset, not "cash.

My question is about the first -segregated account-

The reason for not  included in the current asset is because the fund is to be paid out 11/15/1992 which is more than a year from 10/31/1992.

 So if the fund is to be paid out before or on10/31/1992, the segregated account would be classified as current asset???

Or doesn’t matter when the fund will be paid out, it will always be NON -current asset becuase it is set up for bond sinking fund??  thx!

Gary W. wrote: You are close.  The reason the cash is classified as a non-current asset is that the cash is restricted as to its use.  Therefore, it is not available for use in the coming year.  The classification of the cash, in this example, is not determined by when it is to be paid out, but rather by the fact that it is restricted and not available for use in the coming year.

With the criteria you mentioned above, even if it is for a short term borrowing arrangement which will be due next year, the cash is still restricted and will not be available to use next year becasue it will be used to paid off the short term debt. How should we classify the restricted cash then?

Also, if the cash is restricted for payment of bond, does it mean it is set aside for long term debt? All the bonds are long term debt?

Someone please kindly give me some hint on this.