Page 334 - SBR Integrated Workbook STUDENT S18-J19

Chapter 21

Example 1

Cash equivalents

Loaded is preparing its statement of cash flows for the year ended 31
December 20X1. It is unsure how to deal with the following:

 $5 million that is kept in a high-interest bank account. There is no
penalty if Loaded withdraws the money, although 30 days’ notice is
required. The money is held for the purpose of meeting operating cash
flow shortfalls.

 $4 million invested during the year in the equity shares of Pyramid.
These shares are listed and could be sold for cash immediately.

Discuss whether the above amounts should be classified as ‘cash
equivalents’ in the statement of cash flows.

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