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I am stuck at this question. please help!
THE MOVEMENT ON THE PLANT AND MACHINERY ACCOUNT FOR X IS SHOWN BELOW:
cost b/f 10,000
additions 2,000
disposals (3000)
cost c/f 9000
depreciation b/f 2000
charge for the year 1000
disposals (1500)
depreciation c/f 1500
carrying value b/f 8000
carrying value c/f 7500THE PROFIT ON THE SALE OF MACHINE WAS $500. WHAT FIGURES WOULD APPEAR IN THE STATEMENT OF CASH FLOWS OF X UNDER THE HEADING OF “INVESTING ACTIVITIES”?
A) movement on plant account $500 and profit on disposal of $500
B) movement on plant account $500 and proceeds on sale of plant $2000
C) purchase of plant $2000 and profit on disposal of $500
D) purchase of plant $2000 and proceeds on sale of plant $2000Given that you must have the answer in the same book in which you found the question, say which bit of the answer you are stuck on 🙂
(Unless you have been set this as a test question, in which case we are not here to provide answers to test questions.)I do suggest that you watch our free lectures on Statements of cash flows. Our free lectures are a complete course for Paper F3 and cover everything needed to be able to pass the exam well.
There aren’t any answers in the same book and I am not sure whether to tackle this question with the help of T-accounts? If I do so then, will I make separate T-accounts for cost and carrying value ? And what about disposals ? I was stuck not with a particular bit of the question but the technique to approach this question. Can you please help me start the question ? (If you don’t want to do it fully for me)
Firstly you should use a different book – there is no point in trying to learn from a book that has questions and no answers! (You should use books from one of the ACCA approved publishers – they have answers to all their questions)
Secondly you should watch the free lectures on Statements of cash flows (and on depreciation), where all of this is explained.
Thirdly you certainly do not need t-accounts (and you will not have time to prepare t-accounts in the exam, and will never be asked to prepare the t-accounts).Directly from the question you know that there are purchases of plant of 2,000.
With regard to the disposal, the net book value of the assets sold is 3,000 – 1,500 = 1,500. They were sold at a profit of 500, and therefore the proceeds must have been 1,500 + 500 = 2,000.
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