Question

EX 13-8 Reporting changes in equipment on statement of cash flows Obj. 3 An analysis of the general ledger accounts indicates that office equipment, which cost $202,500 and on which accumulated depreciation totaled $84,375 on the date of sale, was sold for $101,250 during the year. Using this information, indicate the items to be reported on the statement of cash flows. EX 13-9 9 Reporting changes in equipment on statement of cash flows Obj. 3 An analysis of the general ledger accounts indicates that delivery equipment, which cost $80,000 and on which accumulated depreciation totaled $36,000 on the date of sale, was sold for $37,200 during the year. Using this information, indicate the items to be reported on the statement of cash flows.

Answer 1

Ex 13-8

Under Indirect Method of Cash Flow Statement

• Sale of Office Equipment ($101250) would be reported under Cash flow from Investing activities as Cash Inflows, and,
• Loss on Sale of Office Equipment ($16875) would be added to net profit before tax while computing Operating Profit before working capital changes under Cash flow from Operating Activities,
• Also, Depreciation on the office equipment for the current year, if any, shall also be added to net profit before tax while computing Operating Profit before working capital changes under Cash flow from Operating Activities.

Under Direct Method of Cash Flow Statement

• Only Sale of Office Equipment ($101250) would be reported under Cash flow from Investing activities as Cash Inflows.

Ex 13-9

Delivery Equipment A/c Dr Particulars To Cost of equipment Amount Particulars Amount 80,000.00 By Accumulated Depriciation 36,000.00 37,200.00 By Loss on Sale of Equipment. 6,800.00 Balancing Figure20.000.00 S80,000.00

Under Indirect Method of Cash Flow Statement

• Sale of Delivery Equipment ($37200) would be reported under Cash flow from Investing activities as Cash Inflows, and,
• Loss on Sale of Delivery Equipment ($6800) would be added to net profit before tax while computing Operating Profit before working capital changes under Cash flow from Operating Activities,
• Also, Depreciation on the delivery equipment for the current year, if any, shall also be added to net profit before tax while computing Operating Profit before working capital changes under Cash flow from Operating Activities.

Under Direct Method of Cash Flow Statement

• Only Sale of Delivery Equipment ($37200) would be reported under Cash flow from Investing activities as Cash Inflows.