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CMA Intermediate · Corporate Accounting and Auditing · Cash Flow Statement

Kaveri Ltd reported profit before tax of ₹12,00,000. Depreciation was ₹2,00,000, interest expense ₹80,000, and profit on sale of old machinery ₹50,000. Trade receivables rose by ₹1,10,000 and trade payables rose by ₹40,000. Ignoring tax payments, the cash generated from operations is:

Cash generated from operations is ₹13,60,000. Add back depreciation and interest to profit before tax, deduct the profit on sale of machinery because it is an investing item, then deduct the rise in receivables and add the rise in payables.

  1. A₹13,60,000Correct
  2. B₹14,60,000
  3. C₹13,40,000
  4. D₹12,60,000

Explanation

Start with 12,00,000, add depreciation 2,00,000 and interest 80,000 (to be shown under financing) = 14,80,000. Deduct profit on sale 50,000 (investing) = 14,30,000. Deduct increase in receivables 1,10,000 = 13,20,000. Add increase in payables 40,000 = 13,60,000. Option B forgets to deduct the profit on sale.

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