Question

From the following particulars of Phantom Ltd., you are required to calculate:

• Cash from Operating Activities
• Cash from Investing Activities

Particulars	31.3.2021 (₹)	31.3.2020 (₹)
Plant & Machinery (at cost)	4,00,000	4,20,000
Accumulated Depreciation	1,30,000	1,10,000
Goodwill	70,000	90,000
Inventory	20,000	10,000
Trade Payables	15,000	25,000
Provision for Tax	30,000	20,000
Balance of Statement of Profit & Loss	1,00,000	(90,000)

Additional Information:

During the year 2020-21, a machine with a book value of ₹ 50,000 (accumulated depreciation ₹ 20,000) was sold at a loss of ₹ 6,000.

Hint. Purchase of Plant & Machinery ₹ 50,000.

Answer 1

Phantom Ltd.
Cash Flow Statement (Extract) for the year ended 31st March, 2021.
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Operating Activities:
Add:
Net Profit before Tax	2,20,000
Non-Cash Adjustments (W.N. 1)	46,000
Operating Profit before Working Capital changes		2,66,000
Adjustments for Working Capital Changes
Less:
Increase in Inventory	(10,000)
Decrease in Trade Payables	(10,000)
Add: Increase in Provision for Tax	10,000	(10,000)
Cash Generated from Operations		2,56,000
Less: Income Tax Paid		(10,000)
Net Cash from Operating Activities (A)		2,46,000
B. Cash Flow from Investing Activities:
Loss on Sale of Machinery (W.N. 2)		(6,000)
Net Cash used in Investing Activities (B)		(6,000)

Working Note 1: Calculation of Non-Cash Adjustments.

Particulars	Calculation	Amount (₹)
Depreciation	₹ 1,30,000 – ₹ 1,10,000	20,000
Goodwill Written Off	₹ 90,000 – ₹ 70,000	20,000
Loss on Sale of Machinery	Given	6,000
Total Adjustments		46,000

Working Note 2: Calculation of Investing Activity Treatment.

Particulars	Amount (₹)	Reason
Loss on Sale of Machinery	6,000	Treated as a cash outflow per the textbook
Purchase/Sale Ignored	-	Not included as per ISC simplification