[ThdDoublr206]

Greetings,

I encountered this question in Wiley’s test bank:

Tallent Corporation had the following account balances at December 31, 2010:

Cash on hand and in bank $975,000

Cash legally restricted for additions to plant (expected to be disbursed in 2012) 600,000

Bank certificates of deposit (due February 1, 2011) 250,000

In the current assets section of Tallent’s December 31, 2010 balance sheet, what total amount should be reported under the caption “cash and cash equivalents?”

A. $1,225,000

B. $ 975,000

C. $1,575,000

D. $1,825,000

I was studying using the becker 2009 material and I though equivalents were securities with a less than 90 maturity(so small considered cash). Therefore I lumped in the 250,000 in my answer of 1,225,000. However the answer is B 975,000.

Can anyone shed a little light on my view. Appreciate it tremendously

[jjm1181]

The only way the bank certificate wouldn't qualify is if the original maturity is longer than 90 days. For instance a 180 day certificate that matured in January 31, 2011 wouldn't classify as a cash equivalent because it's original maturity was 180 days and not 90.

B 79
A 75
R 78
F 85

[rknight21]

I am currently studying for FAR and the fact that I can answer this question makes me happy because It means I am making progress…

OK for one the COD is not a security and 2. COD's are restricted until due date. No restricted cash is included in Cash & cash Equivalent.

and for the record this question is also in the 2011 wiley material…

[ThdDoublr206]

thanks rknight! Yeah I believe the concept I was missing was that the COD was restricted.

I think back now and think in all other examples they listed money market account.

[wissam]

I have just encountered this same question. In the Becker notes certificates of deposits are listed under cash and cash equivalents if they have an original maturity of 90 days or less. The explanation here says that they are not included because there is a penalty on withdrawal, even though it's less than 90 days to maturity. So which one is it?

[MCLKT]

CD's that have no penalty for early withdrawal, an original maturity of 90 days or less are considered a cash equivalent.

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[Author]

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