Clarion Corp

question 52

Multiple Choice

Clarion Corp.invested cash in a 6-month certificate of deposit (CD) on November 1, 2016.If Clarion Corp.has an accounting period that ends on December 31, 2016, when should Clarion recognize interest revenue from the CD?

• A) On December 31, 2016 only
• B) On May 1, 2017 only
• C) Both December 31, 2016 and May 31, 2017
• D) On the date when its income tax return is filed

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Definitions:

Cash Equivalent

Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Compensating Balance

A minimum bank account balance that a borrower agrees to maintain as a condition for obtaining a loan, often used to offset the bank's credit risk.

Legal Restrictions

Regulations or limitations prescribed by law that affect the actions of individuals, businesses, or governments.

Compensating Balance

A compensating balance is a minimum account balance that a borrower agrees to maintain in an account with a lender as part of a loan agreement.