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an equipment cost of $85,000 and a net book value of $45,000, were sold for $32,000 during the year.
SOFP at 31.12.20×2 (extract)
x2 x1
$000 $000revaluation reserve 100 91
NCA:
cost 720 595
accumulated depreciation 340 290
net book value 380 305which will be included in cash flow from investing activities for the year?
first, i’m so confused, should i use net book value or cost to calculate?
when using cost the answer is 201, using net book value is 161 so which one is correct?
second, i think 201 is cost and after less the depreciation expense it will be 161 (net book value), but in this case the depreciation expense is 50 (340 – 290) so the net book value is 151. can you explain to me what cause the different?
When calculated the depreciation expense you have forgotten to remove depreciation on the asset sold, which is 40.
So the depreciation charge for the year is 90.However that is not really relevant to calculate what appears as cash flow from investing activities. You should the cash received from sale (32,000) and the cash paid for acquisitions (201,000). So a net outflow of 169,000.
so, as your answer we should using cost of asset for cash flow from investing activities when the question provides cost and net book value?
ps: thank you so much for your help.
Yes. However the rest of the information would be relevant if they wanted you to calculate the depreciation adjustment when calculating cash flow from operating activities.
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