Compensating Balances Are a Restriction on the Use of a Company's

question 126

Multiple Choice

Compensating balances are a restriction on the use of a company's cash and should be

• A)reported as a current asset.
• B)reported as a noncurrent asset.
• C)disclosed in the financial statements.
• D)reported as a reduction of cash.

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Definitions:

Student Loans

Borrowed money that is used to pay for higher education expenses, which must be repaid with interest.

Compounded Monthly

A method where interest earnings are calculated and added to the principal sum each month, leading to increased interest in the next period.

Mortgage Loan

A loan secured by real property through the use of a mortgage note.

Savings Account

A financial account at a bank or similar institution that ensures the security of the original sum while yielding a slight return in interest.