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here is a question from F7revision mock.
In the context of the preparation of a statement of cash flows the following information is relevant. PPE net book value at 31 March 2013 $910,000, PPE net book value at 1 April, 2012 $720,000, new assets acquired at a cost of $500,000 of which $100,000 was allowed against an asset disposed of that had a net book value of $80,000 at the date of disposal. During the year PPE was revalued by $150,000. How much depreciation should be added back as a non-cash item in the operating activities section of the statement of cash flows?
.$460,000
.$920,000
.$760,000
.$380,000 (answer)
I am lost, the question has not given useful life of the new assets acquired, please helpHi @sharly,
you are given with NBV at the beginning and end of the period – use this and find depreciation charge for the year as balancing figure.NBV as at 01.04.12: 720,000
Cost of additions within year: +500,000
NBV disposal of as asset: -80,000
Revaluation: +150,000
Total: 1,290,000.So, depreciation charge for the year is 380,000 (1,290,000 less 380,000 will equal NBV at 31.03.13 = 910,000)
Sangria, was I not fast enough?
Sharly, go back to basic T accounts.
The debits are :
Brought forward 720
Purchased 500
Revaluation 150Credits are:
Disposal 80
Carried forward 910The missing figure on the credit side to make it add up to the total of the debits ($1,370) is therefore $380
sir, please! same statement of problem, but different question:
how much should be shown in the investing activities section of the statement of cash flows as an outflow for purchase of new assets and profit on disposal of assets? just can’t figure it out even in T accounts.Purchase of new assets, cash outflow 500 – 100 = 400 cash out in investing activities
Profit on disposal is 100 received less 80 book value = profit of 20
BUT that 20 is not in investing activities – it’s a deduction in arriving at profit from operating activities
It’s the opposite of a depreciation add-back
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