A company holds $100,000 in a term deposit account as an interest-generating investment.For purposes of the statement of cash flows the term deposit will be classified as:
A) cash equivalent
B) investment
C) either cash equivalent or investment
D) none of the above

Question

Quizplus · Accepted Answer

The term deposit is classified as an investment because it generates interest and is not readily convertible to cash. Cash equivalents are highly liquid and have a maturity of less than three months, whereas term deposits are typically longer-term investments. Therefore, option A is not appropriate. Option C suggests that either answer would be acceptable, but this does not reflect the specific characteristics of the term deposit. Option D implies that the term deposit is not relevant for the statement of cash flows, which is not accurate.

A Company Holds $100,000 in a Term Deposit Account as an Interest-Generating