Skip to content

IAI Actuarial Core Principles · Business Finance · Construction and features of company accounts and reports

Kaveri Engineering Ltd had plant at cost of Rs 50 lakh and accumulated depreciation of Rs 20 lakh at the start of the year, and Rs 64 lakh and Rs 26 lakh at the year end. During the year it sold plant with original cost Rs 10 lakh and accumulated depreciation Rs 6 lakh at a loss of Rs 1 lakh. Depreciation charged for the year was Rs 12 lakh. What is the cash outflow for purchase of plant?

The purchase of plant is Rs 24 lakh. Using the cost account, opening Rs 50 lakh less disposals at cost Rs 10 lakh plus purchases must equal closing Rs 64 lakh, so purchases are Rs 24 lakh. The depreciation reconciliation confirms the figures are consistent.

  1. ARs 24 lakhCorrect
  2. BRs 14 lakh
  3. CRs 20 lakh
  4. DRs 21 lakh
  5. Rs 27 lakh

Explanation

Closing cost 64 = opening 50 - cost disposed 10 + purchases, so purchases = 24. Check on accumulated depreciation: 20 + 12 - 6 = 26, which matches the closing balance. The loss and sale proceeds (4 - 1 = 3) do not affect purchases. Rs 14 lakh ignores the cost of the disposed asset.

Did you get it right without looking?

One question tells you little. A timed set on Construction and features of company accounts and reports shows your real accuracy, how long you take and where you lose marks.

Practise Construction and features of company accounts and reportsFree diagnostic mock

More Construction and features of company accounts and reports questions