F3 M1 Cash and Cash Equivalents Flashcards
(7 cards)
What maturity must a financial instrument have to qualify as a cash equivalent?
An original maturity of 90 days or less.
As of Dec. 31, 2024, Acme owned a $10,000 three-month Treasury Bill maturing on Feb. 15, 2025 and a $20,000 six-month CD maturing on Jan. 15, 2025. Acme’s cash equivalents balance was $10,000 because the original maturity of the CD was greater than 90 days.
Is restricted cash classified as cash and cash equivalents?
No. It is illiquid because its use is restricted.
Should a post-dated check that is dated less than 90 days after the balance sheet date be classified as a cash equivalent?
No, because it is dated after the balance sheet date.
When can a company use the legal right of offset to report a net balance of overdrawn bank accounts and positive bank accounts?
When the accounts are at the same bank.
If an overdraft bank account balance cannot be offset by a positive bank account balance, how should the overdraft balance be reported in the financial statements?
As a current liability
Not as cash or a cash equivalent
If a deposited check is returned for non-sufficient funds before the balance sheet date but is redeposited and clears after the balance sheet date, should it be included in cash and cash equivalents as of the balance sheet date?
No, because the check was redeposited after the balance sheet date and therefore was not in transit as of the balance sheet date.
If a check is dated and recorded before the balance sheet date but is not mailed to the payee until after the balance sheet date, should the amount be deducted from cash and cash equivalents as of the balance sheet date?
No, because the check had not been disbursed as of the balance sheet date.
