Which of the following items is treated as a cash equivalent?
A) Commercial paper with a 6-month maturity when purchased and 4 months until maturity at the balance sheet date.
B) Investment in corporate stocks which management intends to sell within 3 months after the balance sheet date.
C) Money market funds which can be obtained overnight from a bank or brokerage firm.
D) Investments in corporate bonds which have 5 years until maturity when they are purchased.

Question

Quizplus · Accepted Answer

Money market funds which can be obtained overnight from a bank or brokerage firm are considered as cash equivalents because they are highly liquid and can be readily converted into cash without any significant loss in value.

Which of the Following Items Is Treated as a Cash