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Question
Read the following information and answer the given question:
X Ltd. made a profit of 5,00,000 after consideration of the following items:
₹ | ||
(i) | Goodwill written off | 5,000 |
(ii) | Depreciation on Fixed Tangible Assets | 50,000 |
(iii) | Loss on Sale of Fixed Tangible Assets (Machinery) |
20,000 |
(iv) | Provision for Doubtful Debts | 10,000 |
(v) | Gain on Sale of Fixed Tangible Assets (Land) | 7,500 |
Additional information:
Particulars | 31.3.2019 (₹) |
31.3.2018 (₹) |
Trade Receivables | 78,800 | 52,000 |
Prepaid Expenses | 3,000 | 2,000 |
Trade Payables | 51,000 | 30,000 |
Expenses Payable | 20,000 | 34,000 |
How will goodwill written off be adjusted in the cash flow statement?
Options
Added to the Net Profit Before Tax
Subtracted the Net Profit before Tax
Not recorded in the Cash Flow
None of these
MCQ
Solution
Added to the Net Profit Before Tax
Explanation:
Because it is a non-cash item, it must be added back to net profit in the cash flow statement to arrive at the cash flow from operating activities.
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