Burr Company had the following account balances at December 31, Year 2

 Burr Company had the following account balances at December 31, Year 2:

Cash in banks    $2,250,000
Cash on hand    125,000
Cash legally restricted for additions to plant (expected to be disbursed in Year 3)    1,600,000
Cash in banks includes $600,000 of compensating balances against short-term borrowing arrangements. The compensating balances are not legally restricted as to withdrawal by Burr. In the current assets section of Burr's December 31, Year 2, balance sheet, total cash should be reported at

$1,775,000.
$2,250,000.
$2,375,000.Correctly
$3,975,000.
 You Answered Correctly!
Cash on hand ($125,000) and cash in banks ($2,250,000) are both reported as cash in the current asset section of the balance sheet because they are both unrestricted and readily available for use. Cash legally restricted for additions to plant ($1,600,000) is not available to meet current operating needs and therefore should be excluded from current assets. Instead, it should be shown in the long-term asset section of the balance sheet as an investment.