Question 1

Cascade Corp. has the following information for its cash and cash equivalents:
- Cash in checking account: $125,000
- Cash in savings account: $75,000
- 3-month certificate of deposit: $50,000
- 6-month certificate of deposit: $100,000
- Money market fund (can be withdrawn anytime): $30,000
- Petty cash: $2,000

What amount should Cascade report as cash and cash equivalents?

Accepted Answer

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.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Including investments with maturities over 3 months, not understanding the 'original maturity' concept, or omitting legitimate cash equivalent items

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 2

More questions from this exam