- September 15, 2019 at 3:02 pm
A company is preparing its statement of cash flows for the year ended 31 December 20X2. Relevant extracts from the accounts are as follows.
Statement of profit or loss $
Profit on sale of non-current assets 40,000
Statement of financial position 20X2 20X1
Plant and machinery – cost 185,000 250,000
Plant and machinery – depreciation 45,000 50,000
Plant and machinery additions during the year were $35,000. What is the cash flow arising from the
sale of non-current assets?
The answer is C . Is it possible if you could show me a T account on how this figure is arrived at? Thanks in advance!September 15, 2019 at 3:18 pm
I can’t write up a t-account here, but I can tell you what goes where 🙂
Prepare an account for the net book value.
On the debit side:
Balance brought forward. 200,000
On the credit side:
Balance carried forward 140,000
The missing figure on the credit side is 80,000 and this must be the net book value of the assets sold.
Since there was a profit on the sale of assets of 40,000, they must have been sold for 120,000.
Have you watched my free lectures on this? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.September 15, 2019 at 3:41 pm
Thank you so much for the answer! May god bless you. And yes i have watched all the lectures , i just got confused a lil bit while attempting this question. I have the exam tomorrow , i hope everything goes well ! 🙂September 16, 2019 at 6:52 am
You are welcome, and good luck with your exam 🙂
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