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Hi i’m wondering if u can help. I was going thru the kaplan exam kit questions and when it comes to calculating the investing activities under the cash flow,i find the answers below confusing
2005 cost/valuation depn NBV
land and building 2000 760 1240
plant 1568 464 11042004 cost/valuation depn NBV
Land and building 1800 680 1120
Plant 1220 432 788The problem is calculatiing the amount purchased amount for land and building. I know the calculation starts with the bf cost but in some answers they use bf NBV against NBV cf and in some answers they use cost/valuation bf and cf to calculate.
Please can you tell me when to use which.
For plant all the answers i have come across so far used the bf of cost and cf of cost to calculate purchased for the year.
I would really appreciate your help.
The both questions are questions 60 and 61 in the kaplan exam kit.Hi
Unfortunately, there is no hard and fast rule. You use what you can and whatever there is available in order to arrive at any missing figure. Sometimes the only information is nbv based, sometimes you are given “full” information of cost / valuation, accumulated depreciation and net book value. Even the course notes ( I seem to remember it’s the first example in the cash flow chapter ) gives an example which can only be solved one way even though it appears from first reading that you have enough information to tackle it from either way.
I’m afraid it comes down to this – the figures in exam questions ( as in real life ) tell a story, and it’s up to you to be able to read the figures and draw out the information which they hold. In simple words, it’s practice, practice and then …… more practice.
get yourself into a position where you are “comfortable” with the figures. You’ll know when you’ve reached that point. Lights will not start flashing and musicians will not start to play. But, you’ll know. It’s at that moment that you feel an inner peace, an appreciation, an understanding.
And from that point on, the figures talk to you and you can hear what they say!
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