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M Co. purchased a three-month US Treasury bill.

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.

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Question ajoutée par mohamed Hakim CMA CPA Candidate , Accounting Manager , Andersen saudi arabia
Date de publication: 2016/08/08
Tomasz L
par Tomasz L , Reporting Specialist , Outworking

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.

mahmoud adel
par mahmoud adel , Regional Financial Manager -Hardee's Kuwait, kurdistan & Baghdad , Americana

Mend Co. purchased a three-month US Treasury bill. 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?

SHAHZAD Yaqoob
par SHAHZAD Yaqoob , SENIOR ACCOUNTANT , ABDULLAH H AL SHUWAYER

Cash flow not changed but reported in finance/ops activities for disclosures principle.

Alexander Varghese
par Alexander Varghese , Senior / Chief Accountant , Taaleem

This purchase will be treated as cash equivalents as per Mend's policy and will be added to beginning opening balance of cash.

prashant gairola
par prashant gairola , Senior Executives/Planning/ Brand Management/Inventory Control/Pricing , LifeStyle Pvt. Ltd. (LANDMARK GROUP)

c. As an outflow from financial actvity

Mohamed Abdul Kader Segu Mohamed
par Mohamed Abdul Kader Segu Mohamed , Business Analyst , Sara Group Holdings

a. As an outflow from operating activities.

mohamed Hakim CMA CPA Candidate
par mohamed Hakim CMA CPA Candidate , Accounting Manager , Andersen saudi arabia

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.

Gayasuddin Mohammed
par Gayasuddin Mohammed , Advocate , Practicing Law before High Court at Hyderabad

b. As an outflow from investing activities.is the answer. Thanks.

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