12th | Volume 3 | Chapter:5 | Question No. 21 to 24 | Cash Flow Statement

Question 21:

Arthur Ltd. Reported a profit of ` 90,000 for the year ended 31st March, 2020, after considering the following:

	`
(a) Tax provided during the year	3,000
(b) Amortisation of goodwill	12,000
(c) Profit on sale of land	5,000
(d) Writing off preliminary expenses	200
(e) Machinery costing 40,000 (accumulated depreciation thereon being ` 18,000) was sold during the year at a loss of `17,000.

Extract of its Balance Sheet in the beginning and at the end of the year is given below:

Particulars

1st April, 2019

(`)

1st April, 2020

(`)

Accounts Receivable

Stock

Cash at Bank

Accounts Payable

Expenses Payable

Provision for Taxation

Investments (Short-term)

Plant and Machinery (Net value)

Proposed Dividend

16,000

15,000

10,000

11,000

5,000

6,000

2,000

1,30,000

10,000

20,000

12,000

8,000

9,000

6,000

4,000

5,000

94,000

12,000

You are required to calculate Cash Flow from Operating Activities as per Accounting Standard-3 (Show your workings clearly).

Answers;

Cash Flow Statement
I. Cash flow from operating activities (A) Net profit as per Statement of profit and loss Add: Proposed dividend Provision of Tax	10000 3000	90,000 13000
Net profit before tax and extraordinary items Add: Depreciation on plant and machinery Goodwill amortised Loss on sale of machinery	14000 12000 17000	103000 43000
		146000
Less: Profit on sale of Land		(5000)
Operating Profit Before Working Capital Changes Add: Stock Expenses payable	3000 1000	141000 4000
		145000
Less: Accounts receivable Accounts payable	4000 2000	6000
		139000
Less: Tax paid		5000
Cash flow from operating activities		134000

Working notes:

Dr.	Plant and Machinery A/c		Cr.
Particulars	`	Particulars	`
To Balance B/d	1,30,000	By bank a/c (Sale) By P&L a/c (Loss) By Depreciation a/c By Balance C/d	5,000 17,000 14,000 94,000
	1,30,000		1,30,000

Space

Dr.	Provision for Tax A/c		Cr.
Particulars	`	Particulars	`
To Bank a/c (Tax Paid) To Balance C/d	5,000 4,000	By Balance B/d By P&L a/c (Loss)	6,000 3,000
	9,000		9,000

Question 22:

From the following information, calculate the amount of Cash Flow from Investing Activities Acquired machinery for ` 10,00,000, paying 10% immediately in cash and accepting a draft for the balance in favour of the vendor, payable after three months. (CBSE 2020)

Answer:

Cash Flow From Investing Activity
Particulars	`
Payment for purchase of Machinery	1,00,000
Cash Used in Investing Activity	1,00,000

Question 23:

Mars Ltd. has Plant and Machinery whose written down value on 1st April, 2021 was `9,60,000 and on 31st March, 2022 was `10,50,000. Depreciation for the year was `35,000. In the beginning of the year, a part of plant was sold for `45,000 which had a written down value of `30,000.
Calculate Cash Flow from Investing Activities

Answer:

Cash Flow from Investing Activities for the year ended March 31, 2022
	Particulars		( `)	( `)
		Purchase of Plant and Machinery	(1,55,000)
		Sale of Plant and Machinery	45,000
	Net Cash Used in Investing Activities			(1,10,000)

Working Notes:

Plant and Machinery Account
Dr.				Cr.
Particulars	( `)	Particulars	( `)
Balance b/d	9,60,000	Depreciation	35,000
Profit and Loss A/c (Profit on Sale)	15,000	Bank A/c (Sale)	45,000
Bank A/c (Purchase)	1,55,000	Balance c/d	10,50,000
	11,30,000		11,30,000

Question 24:

From the following details. Calculate Cash Flow from Investing Activities


Particulars	31st March, 2022 ( `)	31st March, 2021 ( `)
Investment in 10% Debentures	10,00,000	5,00,000
Land and Building	15,00,000	9,00,000

Additional Information:
1. Half of the investment held in the beginning of the year were sold at 10% profit.
2. Depreciation on Land and Building was ` 50,000 for the year.
3. Interest received on investments ` 75,000.

Answer:

Cash Flow from Investing Activities for the year ended March 31, 2022
	Particulars		( `)	( `)
		Purchase of Land and Building (WN1)	(6,50,000)
		Interest received on Investments	75,000
		Sale of Debentures (WN2)	2,75,000
		Purchase of Debentures (WN2)	(7,50,000)	(10,50,000)
	Net Cash Used in Investing Activities			(10,50,000)

Working Notes:

WN1:

Land and Building Account
Dr.				Cr.
Particulars	( `)	Particulars	( `)
Balance b/d	9,00,000	Depreciation A/c	50,000
Bank A/c (Purchase)	6,50,000	Balance c/d	15,00,000
	15,50,000		15,50,000

WN2:

Investment in Debentures Account
Dr.				Cr.
Particulars	( `)	Particulars	( `)
Balance b/d	5,00,000	Bank A/c (Sale)	2,75,000
Profit and Loss A/c (Profit on sale)	25,000	Balance c/d	10,00,000
Bank A/c (Purchase)	7,50,000
	12,75,000		12,75,000