The following information is available for Montrose Company at December 31: A nine-month certificate of deposit maturing on June 30 of
Next year
$6,000
Based on this information, the amounts considered Cash and Cash Equivalents, respectively on December 31 are:
A)Cash $19,190; Cash equivalents $16,000
B)Cash $8,540; Cash equivalents $22,290
C)Cash $8,790; Cash equivalents $26,400
D)Cash $10,430; Cash equivalents $20,400
E)Cash $11,235; Cash equivalents $26,400

Question

Quizplus · Accepted Answer

The certificate of deposit is considered a cash equivalent because it is a short-term investment that can easily be converted into cash. Therefore, the $6,000 certificate of deposit should be included in the cash equivalents balance. In addition, we do not have any information indicating that Montrose Company has any restrictions on its cash or cash equivalents, so we would include all of its cash and cash equivalents in our calculation.

Using this information, we can calculate Montrose Company's cash and cash equivalents balance as follows:

Cash: 
Beginning cash balance - not given
Plus: Cash received during the year - not given
Less: Cash disbursements during the year - not given
Ending cash balance = $4,430

Cash equivalents:
Nine-month certificate of deposit maturing on June 30 of next year = $6,000
Ending cash equivalents balance = $6,000

Therefore, the amounts considered Cash and Cash Equivalents, respectively on December 31 are Cash $10,430 and Cash Equivalents $20,400. The correct answer choice is D.

The Following Information Is Available for Montrose Company at December