Question

cash equivalents
multiple choice

• are recorded in petty cash
• include long - term investments.
• include accounts receivable.
• include 5 - year certificates of deposit.
• are short - term, highly liquid investment assets.

Explanation:

To determine the correct option about cash equivalents, we analyze each choice:

• "Are recorded in petty cash": Petty cash is for small transactions, not cash equivalents. Eliminate.
• "Include long - term investments": Cash equivalents are short - term, so long - term investments are excluded. Eliminate.
• "Include accounts receivable": Accounts receivable is money owed to the company, not a cash equivalent. Eliminate.
• "Include 5 - year certificates of deposit": 5 - year CDs are long - term, while cash equivalents are short - term (usually 3 months or less). Eliminate.
• "Are short - term, highly liquid investment assets": This matches the definition of cash equivalents (short - term, easily convertible to cash, with low risk of value change).

Answer:

The option "Are short - term, highly liquid investment assets" (the last option in the list)