Which of the following investments should be classified as cash equivalents for

Question

Which of the following investments should be classified as cash equivalents for Able Company in preparing the statement of cash flows?

1. Shares of stock in Able Company.

2. A one-month Treasury note purchased by Able Company when only three months remained in the note's term.

3. Share in a money market fund purchased by Able Company; the fund purchases only investment grade corporate debt instruments with maturities of two months or less.

4. one-year treasury note purchased by Able Company when the treasury note was issued, which note now has only two months remaining in its term.

Explanation / Answer

Following will be classified as Cash & Cash Equivalents:

2. A one-month Treasury note purchased by Able Company when only three months remained in the note's term.

3. Share in a money market fund purchased by Able Company; the fund purchases only investment grade corporate debt instruments with maturities of two months or less.

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