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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Himalaya Foods Ltd purchased plant costing Rs 20,00,000 during the year. It paid Rs 12,00,000 in cash and issued 80,000 equity shares of Rs 10 each at par to the vendor for the rest. It also sold an old machine (book value Rs 3,00,000) for Rs 3,40,000 cash and repaid a bank term loan of Rs 5,00,000. What is the net cash flow from investing activities?

Net cash used in investing activities is Rs 8,60,000. Only the Rs 12,00,000 cash paid for plant counts, since the share-settled Rs 8,00,000 is a non-cash transaction, and the Rs 3,40,000 sale proceeds offset it. The loan repayment belongs to financing activities.

  1. ARs (8,60,000)Correct
  2. BRs (16,60,000)
  3. CRs (9,00,000)
  4. DRs (12,60,000)

Explanation

Only cash paid for plant (12,00,000) is an investing outflow; the share-issued portion of 8,00,000 is non-cash and is disclosed separately. Sale proceeds of 3,40,000 are an inflow. Net = 3,40,000 - 12,00,000 = (8,60,000). Loan repayment is financing. Rs (16,60,000) wrongly uses the full plant cost of 20,00,000.

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