ExpertHard1 markMultiple Choice
Area II: Balance Sheet Accountscash and cash equivalentsASC 305cash equivalents definitionmaturity requirements
CPA · Question 41 · Area II: Balance Sheet Accounts
Cascade Corp. has the following information for its cash and cash equivalents:<br/>- Cash in checking account: $125,000<br/>- Cash in savings account: $75,000<br/>- 3-month certificate of deposit: $50,000<br/>- 6-month certificate of deposit: $100,000<br/>- Money market fund (can be withdrawn anytime): $30,000<br/>- Petty cash: $2,000<br/><br/>What amount should Cascade report as cash and cash equivalents?
Cascade Corp. has the following information for its cash and cash equivalents:<br/>- Cash in checking account: $125,000<br/>- Cash in savings account: $75,000<br/>- 3-month certificate of deposit: $50,000<br/>- 6-month certificate of deposit: $100,000<br/>- Money market fund (can be withdrawn anytime): $30,000<br/>- Petty cash: $2,000<br/><br/>What amount should Cascade report as cash and cash equivalents?
Answer options:
A.
$232,000
B.
$282,000
C.
$382,000
D.
$252,000
How to approach this question
Include cash on hand and in banks, plus short-term, highly liquid investments with original maturities of 3 months or less from the date of acquisition. Exclude investments with maturities exceeding 3 months.
Full Answer
B.$282,000✓ Correct
$282,000
Under ASC 305-10-20, cash equivalents are short-term, highly liquid investments with original maturities of 3 months or less. Include: checking ($125,000), savings ($75,000), 3-month CD ($50,000), money market fund ($30,000), and petty cash ($2,000). Exclude the 6-month CD ($100,000).
Common mistakes
Including investments with maturities over 3 months, not understanding the 'original maturity' concept, or omitting legitimate cash equivalent items
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