Which of the following items would be considered a cash equivalent if it was held at the balance sheet date?
A) U.S.Treasury bill purchased when there were 90 days until maturity.
B) Commercial paper with a 6-month maturity which was purchased at the issue date.
C) The common stock of a company traded on the New York Stock Exchange which was purchased 30 days before the balance sheet date.
D) U.S.Treasury note which matures 2 years after it is issued and which was purchased 4 months before the balance sheet date.

Question

Quizplus · Accepted Answer

Cash equivalents are short-term, highly liquid investments that are easily convertible to cash and have a maturity of three months or less at the time of purchase. U.S. Treasury bills purchased with a maturity of 90 days or less are considered cash equivalents. The other items listed are not considered cash equivalents as they have longer maturities and/or are not easily convertible to cash.

Which of the Following Items Would Be Considered a Cash