Question

Property, Plant and Equipment (Net): Closing ₹ 31,75,000, Opening ₹ 25,50,000. During the year, a machine costing ₹ 3,50,000 (Depreciation provided thereon ₹ 1,50,000) was sold for ₹ 1,25,000. Depreciation charged for the year was ₹ 3,50,000.A machine costing ₹ 75,000 was purchased by issue of equity shares of 10 each at a premium of 20%. Net profit Before Tax and Extra-ordinary Items ₹ 2,50,000.

How will these items be shown while preparing Cash Flow Statement?

Answer 1

Cash Flow Statement
Particulars	Amount (₹)	Amount (₹)
I. Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items		2,50,000
Add: Non-Cash and Non-Operating Expenses
1. Depreciation charged for the year	3,50,000
2. Loss on Sale of Machine	75,000	4,25,000
Operating Profit before Working Capital Changes		6,75,000
II. Cash Flow from Investing Activities
1. Proceeds from Sale of Machine (Inflow)	1,25,000
2. Payment for Purchase of PPE (Cash Outflow)	(11,00,000)
Net Cash Used in Investing Activities		(9,75,000)

Working Notes:

1. Calculation of Loss on Sale of Machine

Cost of machine sold = ₹ 3,50,000

Less: Depreciation provided thereon = (₹ 1,50,000)

Book Value (Net) of machine sold = ₹ 2,00,000

Less: Sale Proceeds = (₹ 1,25,000)

Loss on Sale (Non-operating expense) = ₹ 75,000

2. Cash Purchases

Property, Plant and Equipment (Net) Account

Debit (Particulars)	Amount (₹)	Credit (Particulars)	Amount (₹)
To Balance b/d (Opening)	25,50,000	By Bank A/c (Sale Proceeds)	1,25,000
To Share Capital A/c (Non-cash purchase)	75,000	By Statement of P&L (Loss on Sale)	75,000
To Bank A/c (Cash Purchase - Bal. Fig.)	11,00,000	By Depreciation A/c (Charged for year)	3,50,000
		By Balance c/d (Closing)	31,75,000
Total	37,25,000	Total	37,25,000