Question

Gentlemen Ltd needs additional working capital for business expansion

and a quick way to raise funds is to obtain additional overdraft facilities

from its banker, the Rich Bank. In connection with this, the banker

required the company to pledge its fixed deposits ($5 million) a s

collateral for the additional banking facilities. Gentlemen Ltd will not

be able to cancel/withdraw the fixed deposits as long as the company is

using the additional overdraft facility.

Required:

Explain whether Gentlemen Ltd should include the fixed deposits as

part of cash and cash equivalents in accordance with HKAS 7. How

should they be included in the statement of cash flows?

Answer 1

Answey;- The Gent(ementde Should include the fixed cleposits a prt of Cash ard cash euivalents " Q(coidonce wtth HkAS7 nt o Cash and -hey be included in the. Stateme l dimused belou coxdance woth ecl changes in HEAS7 Cash lous stalents, theve has been a charge n łms ot cosh and cash eivalei Cash and cashevalents o thoe kich ?uidaled in a shot pexiad of time. e, 3 Month Can be liqui and without anu etsicton This mean there Shoold be no esticton en ond Cosh euivalerts quontle man mited n the aiven has pledged Its defosīt3 5 million ufth ich bank against the ve dpft JaciiHes This ceasndicated tanos the fived depositi

The Axed depait lt can not védeemed easi Sit can eny be edeemed when the over dhoft facility w closed be coideved Sice. atcounts xeceivable ard nory as payt of ash and casheival etc. X.チ义チ