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Mike, please, don’t know how to deal with this one. shame for me, but I still don’t know how to apply T accounts to cash flow 🙁
Sigma SFP:
December 31, 2008 December 31, 2007
TNCA 280,000 200,000
Accumulated depreciation (111,000) (80,000)SCI for the year ended December 31, 2008:
Depreciation expenses (104,000)
Loss on sale of fixed assets (3,000)Note: During the year Sigma sold one of their cars at book value of 20,000 for 8,000.
Required: Prepare a fragment of a statement of cash flows from investing activities.
Your question doesn’t make sense – there’s an inconsistency in the detail of the disposal. If you dispose of an asset that had a book value of 20,000 and you sell it for 8,000 then the loss suffered on disposal is 12,000 and not 3,000 as you have written
I can’t get much further until you give me the correct detail! Sorry 🙁
sorry, it was ‘initial value’, not ‘book value’, there probably was some depreciation incurred. apart from that that’s exactly the question as it is.
Ok, we’re closer, but still not right!
According to the figures that you have provided to me, there was 100 spent in the purchase of new TNCA (outflow in investing activities), 104 add back of depreciation (positive figure in operating activities), add back 3 loss on disposal (positive figure in operating activities), and 8 cash received from the disposal (positive inflow in investing activities)
HOWEVER!!!!! The accumulated depreciation account now makes no sense.
Brought forward on the credit side 80, carry forward 111 on the debit side, 104 depreciation for the year on the credit side, 9 depreciation on the asset disposed of on the debit side ……
That leaves 184 total credits and only 120 total on the debit side. This is out of balance by 64????
Any ideas?
my idea: these’re the stupidest questions I’ve ever come across. probably, they were translated from English to Russian with some errors (and then I translated them back for you). I also was freaked out by this Dpn. however, I needed to solve them for, well, for my personal purposes, sorry to have bothered you for this :((
there was time pressure, so I solved them my way, which is represented below:
Opening balance at the beginning of the year 120,000
Accumulated depreciation (104,000)
Disposal proceeds (11,000) that is (8,000 + 3,000)
Closing balance at the end of the year 169,000
therefore the purchase of new assets calculation is 169,000 – (120,000 – 104,000 – 11,000) = 164,000
So:
Cash inflow from the sale of TNCA 8,000
Cash outflow for the purchase of TNCA 164,000When you say “Opening balance 120,000 …….” I have no idea which account it is that you are looking at!
However, whichever account it is, it’s wrong!
Look at my working from 3 posts ago!
Opening balance 120,000 (200,000 – 80,000)
Closing balance 169,000 (280,000 – 111,000)
I might wrongly titled them, but that’s what I meant
besides, I had no other choice but to solve this anyhowI’ll have a look at your workings first thing in the morning, it’s just past 2am here now, my brain refuses to think
I see your point now, you mean the outflow would be 280 – 200 + 20 = 100. definitely some error(s) there as it appears
I’ve tried doing it your way (combining both the asset account and the accumulated depreciation account) and of course I arrive at a missing figure of 164,000, the same as you.
But doing it my way throws up the anomaly of a missing 64,000
Can you just check to ensure that the asset was not revalued in the year by 64,000 because that would account for that increase in the asset account?
it probably was, but no sign of it in the question. the authors most likely left this part for us to guess, which I consider unfair, don’t you
thank you for your help, mr. Mike
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