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I have the following example, and I am not sure where to start from, could you give me some hint:
APM provides the following note to non-current assets in its statement of financial position.
Plant and machinery
Cost Depreciation NBV
Opening Balance 25 12 13
Additions/charge 15 4 11
Disposals (10) (8) (2)
Closing Balance 30 8 22The additional machinery was purchased for cash. A machine was sold at a profit of $2,000. What is the net cash outflow for plant and machinery?
Thank you!
I am not sure if the columns are readable though. First column all numbers are under cost title, second col under Depreciation, and third column under NBV. They sum up both horizontally and vertically.
The cash flows are those for buying new machines (an outflow) and those in respect of selling machines (an inflow). You need the net of those two.
The outflow to buy machines is no problem – it is 15 straight from the question.
For the sale of machines, we know what the carrying value (NBV) was: 2.
We know they were sold at a profit of 2. So the cash received on sale must have been 4.That should sort it out for you 🙂
Hallo,
could there be another way of solving this, because I forgot to give the answer and it is $11,000.
Thank you!
Of course it is 11,000!
That is exactly what I told you in my previous answer 🙂
(15 – 4 = 11)
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