Burr Company had the following account balances at December 31, 2006:

align=”left”>

Cash in banks

$2,250,000

Cash on hand

125,000

Cash legally restricted for additions to plant (expected to be disbursed in 2007)

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, 2006 balance sheet, total cash should be reported at

  1. $1,775,000
  2. $2,250,000
  3. $2,375,000
  4. $3,975,000