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Lesson 21, Topic 7

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🎥+✏️Balance Sheet from A to Z solved by P. Farhat 🟢

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Lili Ganciu 3 January 2024

the cutest “stay safe” ever

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1. Mansour Farhat 9 January 2024
  
  Thank you LILI. He wanted to be part of it!
  
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Deepak Panigrahy 4 January 2024

Hi,

I did not get the point no.3 where it is mentioned $23000 restricted in a three month treasury bill. As it has been restricted, it should have been Investment, but we did not take into consideration. Could you please help to clarify the doubt ?

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1. Mansour Farhat 6 January 2024
  
  Hi Deepak,
  
  Cash equivalents are a category in finance and accounting that refers to highly liquid investments that can be quickly and easily converted into a known amount of cash. These investments are so close to cash in terms of their nature and accessibility that they are often treated as cash in financial statements. Here are some key characteristics and examples of cash equivalents:
  
  High Liquidity: Cash equivalents can be converted into cash very quickly, usually within three months or less. This means they are readily available to meet short-term financial obligations.
  
  Known Cash Value: The amount of cash that can be obtained from these investments is known and does not fluctuate much. This means the risk of losing value is very low.
  
  Short Maturity: These investments are typically short-term, often with a maturity date of three months or less from the date of purchase.
  
  Examples of Cash Equivalents:
  
  Treasury Bills: Government-issued securities with short-term maturities.
  Money Market Funds: Mutual funds that invest in short-term debt securities.
  Commercial Paper: Short-term corporate debt instruments.
  Marketable Securities: Short-term debt securities that are readily tradable in the financial markets.
  Certificates of Deposit (CDs): Bank-issued time deposits with short maturity dates.
  In financial statements, cash and cash equivalents are often presented together as a single line item. This is because both are used for paying liabilities and for short-term financial commitments, making them essentially interchangeable for these purposes. This combined amount gives an indication of the company’s liquidity or its ability to pay off short-term obligations.
  
  I hope this helps
  
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  1. Vidyashree V 12 September 2024
    
    Hi Professor, I’m still not clarified with the above explanation, in the point no. 3 it has clearly mentioned as 23000$ restricted in three-month treasury bill which means it comes under short term maturity then why it hasn’t been considered?
    
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2. Maroun, CPA 17 September 2024
  
  Hi Deepak,
  
  The $23,000 in a three-month Treasury bill is classified as a cash equivalent because of its short-term maturity (less than 3 months). Even though it is restricted, it remains part of the cash balance due to its liquidity and short-term nature.
  
  In contrast, longer-term investments would be classified as investments. Since this Treasury bill matures quickly and can easily be converted to cash, it stays under cash and cash equivalents despite the restriction.
  
  I hope this helps clarify things! Let me know if you have more questions.
  
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Dinesh Tiwari 28 January 2024

Hello Professor, per the trial balance and additional information I think common stock is $100,000 and the remaining $200,000 is APIC. Please let me know if I understood it incorrectly. Thanks.

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1. Maroun, CPA 30 January 2024
  
  Hello Dinesh,
  
  The common stock was issued with no par value according to the facts. 100,000 is the number of shares and not a dollar amount. The entire issued amount of $300,000 has been recorded in full under common stock, reflecting the total value of the shares issued.
  
  Hope this makes sense!
  
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  1. Dinesh Tiwari 31 January 2024
    
    Okay, I thought the 100,000 was the dollar amount. It makes sense now. Thanks for the clarification.
    
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    1. Maroun, CPA 1 February 2024
      
      You’re welcome Dinesh!
      
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George Wesley 24 December 2024

Note # 3 related to cash, the $23,000 restricted in a three-month treasury bill was not mentioned in the exercise solution. Please advise

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1. Maroun, CPA 30 December 2024
  
  Hello George,
  
  Professor Farhat clarified around timestamp 2:35 that the $23,000 restricted in a three-month treasury bill is classified as cash. It is included as part of the $30,000 total cash amount in the exercise.
  
  Let me know if you have further questions!
  
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Morlai Bangura 6 April 2025

please explain why the land held for sale is not reported as an asset between current assets and non-current instead reported as investment

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1. Maroun, CPA 1 May 2025
  
  Hello Morlai,
  
  Under ASC 360-10-45-14, land that meets the “held-for-sale” criteria must be shown separately on the balance sheet as either a current asset or a non-current asset, depending on whether the land will be sold within one year or more.
  GAAP does not prescribe one specific heading; it only requires separate presentation and clear labeling. Textbooks—and companies—commonly place such assets under “Investments,” “Other assets,” or a distinct “Assets held for sale” line.
  Current classification is allowed only if the sale is expected within a year and the proceeds will not be used to pay down long-term debt (ASC 210-10-45-4).
  
  In this balance sheet, “land held for sale” is listed separately from the “land” account at $25,000, satisfying GAAP’s separate-presentation requirement. Thus, the layout is acceptable.
  
  I hope this helps!
  
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Omar Al Khatib 19 January 2026

Hello Team,
In question 3 why did we put bonds payable as an investment instead of the bonds payable liability account since we need to pay it back once it matures?

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1. Maroun, CPA 21 January 2026
  
  Hello Omar,
  
  We didn’t treat Bonds Payable as an investment. Bonds Payable is your own debt, so it stays in the liability section (current vs long-term depends on the maturity date).
  
  What got classified as an investment is the $15,000 of cash that’s restricted in a fund to repay the bonds in 2024 (a sinking fund). Since that money is set aside and not available for day-to-day operations, it’s not regular Cash. It’s reported separately, typically as a long-term investment / restricted asset because it’s tied to retiring long-term debt.
  
  Hope this makes sense!
  
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Jesse Grabo 7 April 2026

Hello Professor,
Why did we include the Allowance for uncollectible when Account Receivable was already Net at 60,000?

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1. Maroun, CPA 8 April 2026
  
  Hello Jesse,
  
  Since Accounts Receivable is already stated net at $60,000, the $8,000 allowance has already been deducted.
  
  Therefore, we do not deduct the allowance again. The note is only there to clarify the makeup of the balance:
  
  Gross A/R = $68,000
  Less: Allowance = $8,000
  Net A/R reported = $60,000
  
  Thus, in this exercise, the amount to use on the balance sheet is $60,000, not $68,000 and not $52,000. The allowance is just explanatory here, not an additional adjustment.
  
  Hope this helps!
  
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Heather Somerville 27 August 2026

Hello Professor,
I apologize if I’m missing something obvious but how do we know the land for sale in the fill-in-the blank section (Parcel A) is a long term investment and not short term? It just states that it’s “unused and listed for sale” and the answer is long-term.
Thank you!

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1. Maroun, CPA 29 August 2026
  
  Hello Heather,
  
  We’ve reviewed and updated the exercise for more clarity.
  Thank you for bringing this to our attention!
  
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