The following footnote appeared in a recent financial statement of Oakwood Corporation: The Corporation considers all investment
Question:
The following footnote appeared in a recent financial statement of Oakwood Corporation:
The Corporation considers all investment securities with a maturity of three months or less when acquired to be cash equivalents. All cash and temporary investments are placed with high-credit-quality financial institutions, and the amount of credit exposure to any one financial institution is limited. At December 31, cash and cash equivalents include restricted funds of $36 million.
a. Are the company’s cash equivalents debt or equity securities? How do you know?
b. Explain what is meant by the statement that “the credit exposure to any one financial institution is limited.”
c. Explain what is meant by the term restricted funds used in the footnote.
CorporationA Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
Step by Step Answer:
a Cash equivalents are usually shortterm debt securities eg US Treasury bills highgrade c...View the full answer
Financial Accounting
ISBN: 978-0077862381
16th edition
Authors: Jan Williams, Susan Haka, Mark S Bettner, Joseph V Carcello
