Question

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

Answer 1

Answer:

B. Because cash equivalents are less liquid than​ cash, they must be reported separately from the Cash account

Explanation:

The combined amount of cash and cash equivalents will be reported on the balance sheet as the first line item in the section with the heading current assets.

These cash equivalents are short-term, highly liquid investments with a maturity date that was 3 months or less at the time of purchase.

In other words, there is very little risk of collecting the full amount being reported.