Question

If HHC has $1,900 cash, $500 of government Treasury bills purchased four months ago, $930 of cash set aside for its workers' compensation insurance, how much will the company report on the balance sheet as "Cash and Cash Equivalents"?

Answer 1

Cash is the real money that we have while cash equivalents are instruments that can be turn to cash quickly. They are very liquid.

Treasury bills are cash equivalents. They are very liquid and can be converted into cash quickly. They are instruments in the money market.

Going by this above explanation, the Cash and Cash Equivalents that will be reported on the balance sheet are:

Cash --------------------------------------- $1,900

Treasury bills purchased--------------$500

Total-------------------------------------------$2,400

$2,400 will be reported as Cash and Cash Equivalents on the balance sheet.