Question

The following information has been extracted from the books of Lata Ltd.:

Particulars	31st March, 2024 (₹)	31st March, 2023 (₹)
Machinery (Cost)	70,00,000	50,00,000
Accumulated Depreciation	10,00,000	8,00,000

Additional Information:

1. During the year, a piece of machinery costing ₹ 1,40,000 on which accumulated depreciation was ₹ 90,000, was sold at a gain of ₹ 10,000.
2. Depreciation charged during the year amounted to ₹ 2,90,000. Calculate Cash Flows from Investing Activities.

Answer 1

Cash Flow from Investing Activities

Particulars	Amount (₹)
Proceeds from Sale of Machinery	60,000
Payment for Purchase of Machinery	(21,40,000)
Net Cash Used in Investing Activities	(20,80,000)

Working Notes:

1. Calculation of Sale Proceeds of Machinery

Cost of machinery sold = ₹ 1,40,000

Less: Accumulated Depreciation on it = (₹ 90,00,0)

Book Value of machinery sold = ₹ 50,000

Add: Gain on Sale = ₹ 10,000

Sale Proceeds (Cash Inflow) = ₹ 50,000 + ₹ 10,000 = ₹ 60,000

2. Ledger Accounts to find Purchases

Machinery Account (At Cost)

Debit (Particulars)	Amount (₹)	Credit (Particulars)	Amount (₹)
To Balance b/d (Opening)	50,00,000	By Accumulated Depreciation A/c	90,000
To Gain on Sale of Machinery A/c	10,000	By Bank A/c (Sale Proceeds)	60,000
To Bank A/c (Purchase - Bal. Fig.)	21,40,000	By Balance c/d (Closing)	70,00,000
Total	71,50,000	Total	71,50,000

Accumulated Depreciation Account

Debit (Particulars)	Amount (₹)	Credit (Particulars)	Amount (₹)
To Machinery A/c (Dep. on sold item)	90,000	By Balance b/d (Opening)	8,00,000
To Balance c/d (Closing)	10,00,000	By Depreciation charged during the year	2,90,000
Total	10,90,000	Total	10,90,000