Which of the Following Statements Regarding Cash Equivalents Is Correct

question 49

Multiple Choice

Which of the following statements regarding cash equivalents is correct?

• A) A one-year Treasury note could not qualify as a cash equivalent.
• B) All investments meeting the FASB's criteria for cash equivalents must be reported as such.
• C) The date a security is purchased determines its "original maturity" for cash equivalent classification purposes.
• D) Once established,management's policy for classifying items as cash equivalents cannot be changed.

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Definitions:

Equity Method

An accounting technique used to record investments in associate companies where the investor has significant influence but not full control.

Cash Dividend

A payment made by a company out of its profits to shareholders, usually in the form of cash.

Common Shares

Equity securities that represent ownership in a corporation, providing voting rights and a share in the company's profits via dividends.

Available-for-sale Securities

Financial assets that are not classified as held-for-trading or held-to-maturity, and can be sold in the market.