[10] Bay Manufacturing Co. purchased a 3-month U.S. Treasury bill. In preparing Bay’s statement of cash flows, this purchase wou
ld A. Have no effect. B. Be treated as an outflow from financing activities. C. Be treated as an outflow from investing activities. D. Be treated as an outflow from lending activities.
A is correct. On the statement of cash flows, investing activities include the acquisition and disposition of long-term productive assets or securities that are not considered cash equivalents, and the lending of money and collection of loans. The purchase of a 3-month US Treasury bill is the acquisition of a security; however, it is considered a cash equivalent and thus would not be included in investing activities. Furthermore, the exchange of cash for cash equivalents would result in no net change in cash and cash equivalents. Therefore, the purchase of the 3-month Treasury bill would have no effect on the statement of cash flows.
The vertical line test can be used to determine whether a graph represents a function. If we can draw any vertical line that intersects a graph more than once, then the graph does not define afunction because a function has only one output value for each input value.
