Choice "A" is correct. Cash equivalents are short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in interest rates. Generally, only investments with original maturities of 3 months or less qualify as cash equivalents. Original maturity is determined from the date an investment was purchased by the reporting entity, not the date of issuance of the security. Both the 3-month $30,000 T-bill and the 3-year $50,000 T-note mature in 3 months or less from the date purchased, for a total cash equivalents of $80,000.
Choice "b" is incorrect. Cash equivalents include investments with original maturities (from date purchased) of 3 months or less.
Choice "c" is incorrect. Cash equivalents include investments with original maturities (from date purchased) of 3 months or less. The 3-year T-note has a 2 ½ month maturity from the date purchased so it qualifies as a cash equivalent.
Choice "d" is incorrect. The $100,000 5-year T-note has a 5-year maturity from the date purchased. To qualify as a cash equivalent, it must mature in 3 months or less from the date purchased.