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Mend’s policy is to treat as cash equivalents all highly liquid
investments with an original maturity of three months or less
when purchased. How should this purchase be reported in
Mend’s statement of cash flows?
a. As an outflow from operating activities.
b. As an outflow from investing activities.
c. As an outflow from financing activities.
d. Not reported.
I agree with Alexander. Mend’s policy treats 3 month US Treasury bill as cash equivalents. There is no change in the cash flow (operating, investing, financing activities) but you must add missing amount to balance the cash from balance sheet.
This purchase will be treated as cash equivalents as per Mend's policy and will be added to beginning opening balance of cash.
c. As an outflow from financial actvity
a. As an outflow from operating activities.
answer is D
The statement of cash flows is required to be
prepared based on inflows and outflows of cash and cash
equivalents during the period. The purchase of a cash
equivalent using cash is not an outflow of cash and cash
equivalents; it is merely a change in the composition of
cash and cash equivalents.
b. As an outflow from investing activities.is the answer. Thanks.
