question_answer
From the following information, calculate cash flow from investing activities. Particulars | Closing (Rs.) | Opening (Rs.) |
Machinery (At cost) | 8,40,000 | 8,00,000 |
Accumulated Depreciation | 2,20,000 | 2,00,000 |
Patents | 3,20,000 | 5,60,000 |
Additional Information (i) During the year, a machine costing Rs. 80,000, accumulated depreciation Rs. 48,000 was sold for Rs. 40,000. |
(ii) Patents were written-off to the extent of Rs. 80,000 and some patents were sold at a profit of Rs. 40,000. |
Answer:
Cash Flow from Investing Activities Particulars | Amt (Rs.) |
Proceeds from Sale of Machinery | 40,000 |
Payment on Purchase of Machinery (WN 1) | (1,20,000) |
Proceeds from Sale of Patents (WN 3) | 2,00,000 |
Cash Flow from Investing Activities | 1,20,000 |
Working Notes Dr Machinery Account Cr Particulars | Amt (Rs.) | Particulars | Amt (Rs.) |
To Balance b/d | 8,00,000 | By Bank A/c (Sale of Machinery) | 40,000 |
To Profit on Sale of Machinery A/c | 8,000 | By Accumulated Depreciation A/c | 48,000 |
(Statement of profit and loss) | | (Depreciation on machinery Sold) | |
To Bank A/c (Purchases) | 1,20,000 | By Balance c/d | 8,40,000 |
(Balancing figure) | | | |
| 9,28,000 | | 9,28,000 |
Profit on Sale = Sale Price - Book Value of Machinery =Rs. 40,000 ?Rs. 32,000 (80,000 - 48,000 =Rs. 8,000 2. Dr Accumulated Depreciation Account Cr Particulars | Amt (Rs.) | Particulars | Amt (Rs.) |
To Machinery A/c | 48,000 | By Balance b/d | 2,00,000 |
(Depreciation on machinery sold) | | By Depreciation A/c (Statement of Profit and loss) (Balancing figure) | 68,000 |
To Balance c/d | 2,20,000 | | |
| 2,68,000 | | 2,68,000 |
3 Dr Patents Account Cr Particulars | Amt (Rs.) | Particulars | Amt (Rs.) |
To Balance b/d | 5,60,000 | By Bank A/c (Sale) (Balancing figure) | 2,00,000 |
To Profit on Sale of Patents A/c | 40,000 | By Amortisation A/c (Statement of Profit and loss) | 80,000 |
(Statement of profit and loss) | | By Balance c/d | 3,20,000 |
(Given) | | | |
| 6,00,000 | | 6,00,000 |