Question

From the following information, calculate cash flows from investing activities:

	31.3.2021 (₹)	31.3.2022 (₹)
Plant and Machinery	12,00,000	15,00,000
Investments (Long-term)	1,50,000	4,20,000
Land (at Cost)	5,00,000	4,00,000

Additional Information:

1. Depreciation charged on Plant and Machinery ₹ 72,000.
2. Plant and Machinery with a book value of ₹ 1,20,000 was sold for ₹ 75,000.
3. Investments were purchased for ₹ 3,00,000. Some investments were sold at a loss of ₹ 10,000. Interest received on investments during the year ₹ 15,000.
4. Land was sold at a profit of ₹ 80,000.

Answer 1

Cash Flows from Investing Activities
Particulars	Amount (₹)
Sale of Plant & Machinery	75,000
Sale of Investments	20,000
Interest received on Investments	15,000
Sale of Land	1,80,000
	2,90,000
Purchase of Plant & Machinery	(4,92,000)
Purchase of Investments	(3,00,000)
	(7,92,000)
Net Cash Used in Investing Activities (2,90,000 − 7,92,000)	(5,02,000)

Working note 1: Calculation of Purchase of Plant & Machinery:

Opening Balance − P & M sold − Depreciation + Purchases = Closing Balance

12,00,000 − 1,20,000 − 72,000 + x = 15,00,000

10,08,000 + x = 15,00,000

∴ x = 15,00,000 − 10,08,000

∴ x = ₹ 4,92,000

∴ Cash outflow for P&M purchase = ₹ 4,92,000

Working note 2: Calculation of Investments:

• Purchased = ₹ 3,00,000 (Outflow)
• Sold at a loss of ₹ 10,000

Let the book value of investments sold = ₹ x

Then, Sale Value = x − ₹ 10,000

We know that:

Opening Balance + Purchase − Book value sold = Closing Balance

₹ 1,50,000 + ₹ 3,00,000 − x = ₹ 4,20,000

₹ 4,50,000 − x = ₹ 4,20,000

∴ x = ₹ 4,50,000 − ₹ 4,20,000

∴ x = ₹ 30,000

Thus, Sale proceeds = ₹ 30,000 − ₹ 10,000 = ₹ 20,000

∴ Cash inflow from sale of investments = ₹ 20,000

Working note 3: Calculation of Land:

• Decreased from ₹ 5,00,000 to ₹ 4,00,000
• Book Value of land sold = ₹ 1,00,000
• Profit = ₹ 80,000
• Cash inflow = ₹ 1,00,000 + ₹ 80,000 = ₹ 1,80,000