D is corrent. Cash on hand and in banks in included in "cash and cash equivalents" because it is both unrestricted and readily available. Cash legally restricted for plant additions should be shown in the long-term assets section as an investment. Bank certificates of deposit ($250,000 due on February 1, year 2) are excluded since the original maturity date was greater than three months. To qualify as cash, ASC Topic 305 requires that funds be available upon demand without restriction or penalty. However, to qualify as a cash equivalent, ASC Topic 305 requires the original maturity date to be three months or less from the date of purchase. Therefore, certificates of deposit or any other instruments having a original maturity date greater than three months from the date of purchase are not considered cash equivalents. Hence, Tallent’s cash and cash equivalents total $975,000, the amount of its cash on hand and in banks.
A is incorrect because restricted cash is not considered a "cash and cash equivalent."
B is incorrect because it includes the bank certificates of deposit, which should be excluded due to having an original maturity date greater than three months from the date of purchase.
C is incorrect because restricted cash is not considered a "cash and cash equivalent" and instruments with original maturity dates greater than three months from the date of purchase are not considered cash equivalents.
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