Skip to content

CMA Intermediate · Financial Management and Business Data Analytics · Fund Flow Statement - Preparation and Analysis

Rohan Ltd had plant at cost Rs 6,00,000 with accumulated depreciation Rs 2,00,000 at the start of the year. During the year a plant costing Rs 1,00,000 with accumulated depreciation Rs 60,000 was sold for Rs 55,000. Depreciation charged for the year was Rs 70,000. Closing plant at cost was Rs 6,80,000. What is the plant purchased during the year (application of funds) and the profit/loss on sale?

Purchases are Rs 1,80,000 because closing gross block 6,80,000 equals opening 6,00,000 less the 1,00,000 sold plus purchases. The plant sold had a book value of 40,000 and fetched 55,000, giving a profit of Rs 15,000.

  1. ARs 1,80,000 purchase; profit Rs 15,000Correct
  2. BRs 1,80,000 purchase; loss Rs 15,000
  3. CRs 2,50,000 purchase; profit Rs 15,000
  4. DRs 1,80,000 purchase; profit Rs 55,000

Explanation

Gross block: 6,00,000 - 1,00,000 + purchase = 6,80,000, so purchase = 1,80,000. Book value of plant sold = 1,00,000 - 60,000 = 40,000; sale price 55,000 gives profit 15,000. Using 2,50,000 wrongly adds the depreciation, and a loss would be wrong since proceeds exceed book value.

Did you get it right without looking?

One question tells you little. A timed set on Fund Flow Statement - Preparation and Analysis shows your real accuracy, how long you take and where you lose marks.

Practise Fund Flow Statement - Preparation and AnalysisFree diagnostic mock

More Fund Flow Statement - Preparation and Analysis questions