C is corrent. If no restrictions apply, cash in checking accounts ($350,000) is always included in cash. Per ASC Topic 305, cash equivalents are short-term, highly liquid investments which are readily convertible into cash and have maturities of 3 months or less from the date of purchase by the entity. Common examples are treasury bills, commercial paper, and money-market funds. In this case, the cash equivalents are the money-market account ($250,000) and the treasury bill ($800,000). Therefore, total cash and cash equivalents is $1,400,000 ($350,000 + $250,000 + $800,000). The maturity of the treasury bond was at least 12 months (3/1/Y1 to 2/28/Y2) from the date of purchase, therefore, it should not be reported in cash and cash equivalents.
A is incorrect because it fails to include the cash in money-market account.
B is incorrect because it inappropriately includes the US Treasury bond purchased on 3/1/Y1 with an original maturity date greater than threee months from the date of purchase.
D is incorrect because it fails to consider the US Treasury Bill purchased on 12/1/Y1 with an original maturity date of three months from the date of purchase.
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