[Anonymous]

I’m using Yaeger and CIndy mentioned in one of the lectures that CD’s are cash equivalents. However, I just did an MCQ in the Wiley Test Bank and got it wrong because I included the amount of the CD in the cash equivalent balance. The solution says “to qualify as a cash equivalent, ASC Topic 305 requires that funds be available upon demand without restriction or penalty. Therefore, certificates of deposits or any other instruments having a penalty for early withdrawal are not considered cash equivalents.”

So, who’s right?

[Yvonne570]

The term cash and cash equivalents includes: currency, coins, checks received but not yet deposited, checking accounts, petty cash, savings accounts, money market accounts, and short-term, highly liquid investments with a maturity of three months or less at the time of purchase such as U.S. treasury bills and commercial paper. The items included as cash and cash equivalents must also be unrestricted.

CD's are cash equivalents if they are short-term, unrestricted CDs, which yes fall under this category.

AUD - Passed:)
FAR - Passed:)
REG - Retake TBD
BEC - Missed by 3 points Retake TBD

[See Pee A]

Yvonne's point is good. I had trouble with those questions as well. Typically, cash & cash equiv. are regarded as those instruments with a maturity of 3 mo. or less. What got me before was trying to learn what types of things were(not) in that category (i.e. commercial paper, short-term notes, etc.) but what ended up happening is that it depends more on the maturity than the instrument itself. Pay attention to the original maturities and you'll do great!

BEC 86 (08/30/11)
FAR 84 (10/13/11)
REG 88 (11/08/11)
AUD 86 (11/29/11)

Exam prep - Becker self-study

[Author]

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