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D is corrent. The requirement is to determine the amount that should be classified as cash on Smith’s balance sheet. D is corrent because the cash on Smith’s balance sheet is equal to the cash in the savings account in Big Bank of $155,000. The negative balance in the checking account at Small Bank would be reclassified as a payable and is reported as a liability on the balance sheet.
A is incorrect because deposits in transit and outstanding checks should be considered when determining "cash" and negative cash balances should be recorded as a liability, not netted with positive cash balances.
B is incorrect because deposits in transit and outstanding checks should be considered when determining "cash" and negative cash balances should be recorded as a liability, not netted with postive cash balances.
C is incorrect because the negative cash balance should be classified as a liability rather than be netted with the positive cash balance.