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Hey sir,
Good day sir. The pressure is mounting too high and too fast. one more question sir.
Question 3a of dec 2011.(statement of cash flows-Mocha)
The following additional information is available:
(i) cost Accum dep carrying value
At 30 sept 2010 33600 (9500) 24100
new finance lease additions 6700 6700
purchase plant 8300 8300
disposal of property (5000) 1000 (4000)
depreciation for yr (2500) ( 2500)
at 30 sept 2011 43600 (11000) 32600
the property was disposed of for $8.1 millionAm confuse with with how to calculate the changes in NCA in investing activity.
sir you help is highly appreciated.Operating activities, add back depreciation expense of 2,500 (given) and deduct profit on disposal 4,100 (8,100 – 4,000)
Investing activities: proceeds of asset disposal 8,100 inflow (given), purchase of TNCA 8,300 outflow (given)
Is that ok?
Sir,
thank you sir, but one thing again. what about the new finance lease addition. are we to treat it as loan and under financing activity or we capitalized and treat it as an asset.More clarity.
The new asset cost will be needed to be taken into account for the purposes of calculating the cash cost of new assets purchased. The new asset itself has NOT been paid for using cash so the double entry to record the newly finance leased asset will be to Dr TNCA and Cr Finance Lease Creditor account and then payments to the finance lease creditor (capital element only) will appear as an outflow in financing activities whereas the finance lease interest will be included within interest paid in operating activities
You need the capitalised figure in your workings because the cash price of the newly finance leased asset accounts for some of the movement in the TNCA figures though the newly f-l asset itself does not involve cash
Is that ok?
Good morning sir,
Thank you for the clarification.
Sir, still in the same question (iii). it is said there was a bonus issue funded from the share premium account and some of revaluation reserves and the rest for cash at par.
In the question, equity shares of $1 b/f 8000, c/f 14000, which means there was a bonus issue of 6000 shares. at par ie $6000.which in my workings I thought of that to be an inflow. but when I referred to the sample answer at the end of my working, I realised that it was solved as follows: 6000- 2000- 1600= 2400 as cash inflow.
Sir kindly explain the reasoning behind this working.thank you once more,
If it’s funded part by share premium, part by revaluation and part by cash, how much CASH is involved?
Not having the question in front of me, I assume that the balance on the share premium account was 2,000 and the balance on the revaluation reserve was 1,600
So, to issue the bonus shares, here’s the double entry:
Dr Share Premium account 2,000
Dr Revaluation Reserve 1,600
Dr Cash 2,400
Cr Share Capital 6,000Now, ask yourself “How much CASH is involved in that transaction”
OK?
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