4A cash equivalent is a shortterm highly liquid i nvestment

4/)A cash equivalent is a short-term, highly liquid i nvestment that is readily convertible into known crnounts of cash ?nd A. Is acceptable as a means to pay current liabilitios B. Has a current market value that is greater than its original cost d. Eears an interest rate that is at least equal to the prime rate of interest at the date of liquidation. D. Is so near its maturity that it presents ltle risk of changes in interest rates 48) Hobby Company has the following items at year-end: Cash in bank Petty cashh Commercial paper with maturity of 2 months Employee travel advances $20,000 300 5,500 1,400 Hobby should report cash and cash oequivalents of A. $20,000 B. $20,300. C. $25,800. D. $27,200. 49) A check returned with the bank statement was correctly paid by the bank for $100. This check was recorded on the books for only $10. Which of the following actions is required on the bank reconciliation? A Add $90 to the bank balance. B. Add $90 to the book balance. C. Subtract $90 from the bank balance D. Subtract $90 from the book balance 50) In preparing its bank reconciliation for the month of April, the following information was available. Balance per bank statement, 4/30 NSF check returned with 4/30 bank statement Deposits in transit, 4/30 Outstanding checks, 4/30 Bank service charges for April $35,140 450 4,000 5,200 20 What is the correct cash balance on April 30? A. $35,140 B. $34,670 C. $33,940 D. $33,470

Solution

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47. The right option is (D), is so near its maturity that it presents little risk of changes in interest rate.