Cash in checking account $ 35,000 Cash in money market account 75,000 U.S. Treas

Question

Cash in checking account

$ 35,000

Cash in money market account

75,000

U.S. Treasury bill, purchased 12/1/Yr 4, maturing 2/28/Yr 5

200,000

U.S. Treasury bill, purchased 12/1/Yr 3, maturing 5/31/Yr 5

150,000

Inch Co. had the following balances at December 31, Year 4:

Cash in checking account

$ 35,000

Cash in money market account

75,000

U.S. Treasury bill, purchased 12/1/Yr 4, maturing 2/28/Yr 5

200,000

U.S. Treasury bill, purchased 12/1/Yr 3, maturing 5/31/Yr 5

150,000

Inch’s policy is to treat as cash equivalents all highly-liquid investments with a maturity of 3 months or less when purchased. What amount should Inch report as cash and cash equivalents in its December 31, Year 4, balance sheet? A. $235,000 B. $460,000 C. $110,000 D. $310,000

Explanation / Answer

Correct answer is d. $310,000.

Cash & Cash equivalents as on 31st Dec(Year 4) to be reported in Balance sheet are:

Note:

1. Both Cash are included because they are CASH in checking & money market accounts which can be withdrawn anytime.

2. Treasury Bills only of maturity less than 3months are included as per Inch Co.'s policy.

So, the one purchased on 12/1/yr4 maturing on 2/28/yr5 i.e. in 3 months is included while, the one purchased on 12/1/yr3 maturing on 5/31/yr5, i.e. in 18months is not included as it is not highly liquid.

CASH in Checking account $35,000 CASH in money market account $75,000 U.S. Treasury Bill(3 months maturity) $200,000 Total $310,000

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.