Question

The basis recommended by the FASB for the statement of cash flows is ""cash and cash equivalents."" As described by GAAP, cash equivalents are:

A. All current assets that have no realization problems associated with them.
B. Short-term, highly liquid investments that are both readily convertible to known amounts of cash, and so near their maturity that they present insignificant risk of
changes in interest rates.
C. All cash and near cash items that will be turned into cash within one operating period or one year, whichever is shorter.
D. All cash and investments in short-term securities that have a maturity of three months or less from the date of the financial statements.

Answer 1

Cash equivalents, as described by GAAP, are short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in interest rates.

Step-by-step explanation:

The basis recommended by the FASB for the statement of cash flows is "cash and cash equivalents." Cash equivalents, as described by GAAP, are short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in interest rates. This means that cash equivalents include investments such as Treasury bills, commercial paper, and money market funds that can be easily converted into cash.