- This topic has 3 replies, 2 voices, and was last updated 7 months, 3 weeks ago by Lynn Roden.
How Come the Treasury has more thank 3 months ?????
1- maturing Feb. 28, 20X6 (31.12.20×5..to .to 28.2.20×6 ) is about 31+28=59 days
2- maturing Mar. 31, 20X6 (31.12.20×5..to .to 31.3.20×6 ) is about 31+28+31 =90 days
5. Question ID: CMA1 M1 Q59 (Topic: Cash)
Trans Co. had the following balances at December 31, 20X5:
Cash in checking account $ 35,000
Cash in money market account 75,000
U.S. Treasury bill, purchased Nov. 1, 20X5, maturing Feb. 28, 20X6 350,000
U.S. Treasury bill, purchased Dec. 1, 20X5, maturing Mar. 31, 20X6 400,000
Trans’s policy is to treat as cash equivalents all highly-liquid investments with a maturity of three months or less when purchased. What amount should Trans report as cash and cash equivalents in its December 31, 20X5 balance sheet?
Correct Answer Explanation for A:
Only the cash in the checking account ($35,000) and the cash in the money market account ($75,000) are classified as cash and cash equivalents. Both U.S. Treasury bills had a maturity of more than three months when they were acquired and therefore do not meet the definition of cash equivalents, although they are current assets. Cash and cash equivalents on the balance sheet will be $110,000.
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