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+--- Thread: is it right? (/thread-is-it-right)
is it right? - darenatto - 04-27-2007
plz suggest is this the right approach of solving the following question?
QAPM ltd provides the following note to the fixed assets in its balance sheet
plant and machinery
cost depreciation net book value
$000 $000 $000
opening balance 25 12 13
additions/charge 15 4 11
disposals (10) (8) (2)
closing balance 30 8 22
the additional machinery was purchased for cash.a machine was sold at a profit of $2000.what is the nt cash outflow for plant and machinery?
MY ANSWER
increase/decrease in assets
opening balance $12000
additions/charge $4000
profit ($2000)
therefore the net cash outflow for plant and machinery will be $14000.
is this right?my email address [email protected]
- kamranACA - 04-30-2007
There are three accounting periods appearing in your question. Cashoutflow of which period You want to calculate? It is not clear.
Cash flows of fixed assets are normally calculated as under
NUMBER 1
FIXED ASSETS ACQUIRED
+Additions forthe year
+closing capital work-in-progress (if any, given in question)
-opening balance of capital work-in-progress (if any, given in question)
-cost of assets transferred to operating fixed assets from assets subject to finance lease on completion of lease term (if any, given in question)
+Accumulated depreciation on assets subject to finance lease transferred to operating assets on completion of lease term (if any, given in question)
= CASH OUTFLOW ON FIXED ASSETS ACQUIRED
NUMBER 2
PROCEEDS FROM OPERATING FIXED ASSETS SOLD
+Cost of operating fixed assets deleted (disposed of/sold) during the period
-accumulated depreciation on asset sold/disposed of/deleted during the period
+/(-)Gain / (loss) on disposal of such asset accounted for in other income.
= CASH INFLOW FROM OPERATING FIXED ASSETS
Both the above cash flows will collectively show the net cash inflow or cash outflow from operating fixed assets.
These are almost all inclusive formulas. You can ignore those line items which are not given in you question and you will get the right answer.
Regards,
Kamran.