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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Sundaram Engineering Ltd had net PPE of ₹10,00,000 at the start of the year and ₹12,00,000 at the end. Depreciation for the year was ₹1,50,000. During the year, a machine with a book value of ₹80,000 was sold at a loss of ₹20,000. There were no revaluations or other adjustments. The company also received interest of ₹25,000 and dividend of ₹15,000, which it classifies as investing inflows. Net cash flow from investing activities is:

Net investing cash flow is an outflow of ₹3,30,000. Purchases of PPE are ₹4,30,000 and sale proceeds are ₹60,000 (book value ₹80,000 less loss ₹20,000). Adding interest of ₹25,000 and dividend of ₹15,000 received gives the net outflow of ₹3,30,000.

  1. A₹(3,90,000)
  2. B₹(3,70,000)
  3. C₹(3,30,000)Correct
  4. D₹(3,10,000)

Explanation

Purchases = closing 12,00,000 - opening 10,00,000 + depreciation 1,50,000 + book value of asset sold 80,000 = 4,30,000 outflow. Sale proceeds = 80,000 - 20,000 = 60,000 inflow. Net = -4,30,000 + 60,000 + 25,000 + 15,000 = -3,30,000. Omitting interest and dividend gives -3,70,000. Using the book value 80,000 as proceeds gives -3,10,000.

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