M Co. purchased a three-month US Treasury bill.

I agree with Alexander. Mend’s policy treats 3 month US Treasury bill as cash equivalents. There is no change in the cash flow (operating, investing, financing activities) but you must add missing amount to balance the cash from balance sheet.

Mend Co. purchased a three-month US Treasury bill. Mend’s policy is to treat as cash equivalents all highly liquid investments with an original maturity of three months or less when purchased. How should this purchase be reported in Mend’s statement of cash flows?

Cash flow not changed but reported in finance/ops activities for disclosures principle.

This purchase will be treated as cash equivalents as per Mend's policy and will be added to beginning opening balance of cash.

c. As an outflow from financial actvity

a. As an outflow from operating activities.

answer is D  

The statement of cash flows is required to be

prepared based on inflows and outflows of cash and cash

equivalents during the period. The purchase of a cash

equivalent using cash is not an outflow of cash and cash

equivalents; it is merely a change in the composition of

cash and cash equivalents.

b. As an outflow from investing activities.is the answer. Thanks.