Question

17a. Which one of the following would never be considered a cash equivalent?

	a.	U.S. Treasury bills
	b.	corporate commercial paper
	c.	money market funds
	d.	common stock issued by a corporation

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

17B.

A company receiving payment of a $20,000 accounts receivable within 10 days with terms of 2/10, n/30, would record a sales discount of:

	a.	10% of $20,000
	b.	2% of $20,000
	c.	(100% - 10%) x $20,000
	d.	(100% - 2%) x $20,000

Answer 1

17a. Optyion " d" Common stock issued by a corporation

Cash equivalents are investments securities that are meant for short-term investing; they have high credit quality and are highly liquid.

Here Common stock issued by a corporation comes under Equity Section but not Considered as Cash Equivalent.

17b. Option " b " 2% of $20,000

Generally Sales discount as percentage is applied on the sale price.

Therefore Sales discount on above Sales = 2% of $20,000