Which of the following statements regarding cash equivalents is INCORRECT?
A)Cash equivalents are sufficiently similar to cash and thus can be reported along with cash on the balance sheet.
B)Cash equivalents include high-grade U.S.or foreign government securities that are very close to maturity (three months or less at the time of purchase).
C)Most companies include additional information about cash and cash equivalents in the footnotes to their financial statements.
D)Because cash equivalents are less liquid than cash,they must be reported separately from the Cash account.

Question

Quizplus · Accepted Answer

This statement is incorrect because cash equivalents are actually more liquid than most other current assets, including accounts receivable and inventory. Therefore, they are typically reported together with cash and are not required to be reported separately.

Which of the Following Statements Regarding Cash Equivalents Is INCORRECT