Solution 3-15 (Indirect Method)

Profit Before Tax 560

Depreciation 49 (refer accumulated t-ac
Gain on sales of plant (4)

Profit before working 605

capital changes

Decrease in Receivables (net) (369) 270

decrease in inventories 8
Decrease in payables 32
Tax paid (105) (refer provision for tax

Cash flow from Operating Activities 171

Investing Activities
Purchase of Equipment (100)
Sale proceeds of plant sold 16

Cash flow from investing Activities (84)

Financing Acitvities
Share capital -
Dividend -

Cash flow from financing Activities -

Total 87
Opening balance of cash 228
Closing balance of Cash 315

Accumulated Depreciation
Dr Cr
Acc. Dep plant sold 40 46 Op bal
Cl. Bal 55 49 Depreciation expense
Total 95 95

Plant
Dr Cr
Op. Bal 454 52 equipment sold
Purchase of Equipment 100
502 Cl. Bal
Total 554 554

Provision for taxation

Dr Cr
income tax paid (balancing figure) 105 8 Op bal
Cl. Bal 10 107 Income tax expense (given)
Total 115 115
 Solution 3-15 (direct Method)

Recipts
(refer accumulated t-account and plant t-account) Payments
Net Payments
**Other cash expenses
Tax Paid

Cash flow from Operating Activities

238 (32)
Cash flow from investing Activities

(refer provision for tax t-account) Cash flow from financing Activities

Total
Opening balance of cash
Closing balance of Cash

A/c Receivable
Dr
Op. Bal 360
Sales 3,100

Total 3,460

A/C payable
 Dr
Payment (balancing figure) 2,160
Cl. Bal 270
Total 2,430

*Purchases
COGS 2,200
ADD Ending Inventory 342
Less Opening Inventory (350)

Purchases 2,192

**Other Cash Expenses

Operating expenses 340
Gain on sales of plant 4
Depreciation expense (49)
295
 2,731
(2,160)
571
(295)
(105)

171

(84)

87
228
315

A/c Receivable
Cr
2,731 Receipts(balancing figure)

729 Cl. Bal

3,460

A/C payable
Cr
238 Op bal
2,192 *Purchases
2,430
 Solution 3-16

Profit Before Tax 4,750

Depreciation 750
Amortization 646
Markup 500
Profit before working 6,646
capital changes

Decrease in Receivables (50)

Increase in inventories (290)
Decrease in payables 100
Decrease in accured expenses
Tax paid (1,000)

Cash flow from Operating Activities 5,406

Investing Activities
Purchase of Equipment (4,550)
Short term investment (250)

Cash flow from investing Activities (4,800)

Financing Acitvities
Term finance certificate
Share capital 600
markup/Interest paid (500)
Intangible asset - cost incurred (846)

Cash flow from financing Activities (746)

Total (140)
Opening balance of cash (100)
Closing balance of Cash (240)

Intangible Assets
Dr Cr
Op. Bal 1,000 646 *Amortization
Cost incurred 846
1,200 Cl. Bal
Total 1,846 1,846

*Amortization
Carrying value 1,200
Amortization rate 35%
point in the additional information says, "intangibles are amortized at 35% of carrying value"
this means the 1200 carrying value is after the amortization, which means it is representing 65%
gross carrying value of intangible asset 1,846.15
Amortization cost 646

Provision for tax

Dr Cr
Tax Paid (given) 1,000 1,500 Op bal
1,750 current year provision(balancing figure)
Cl. Bal 2,250
Total 3,250 3,250

Equipment
Dr Cr
Op. Bal 10,000 equipment sold
Purchase of Equipment 4,550 3,300 revaluation
750 depreciation
10,500 Cl. Bal
Total 14,550 14,550

Net Equity
Dr Cr
revaluation 3,300 11,100 Op bal
600 new share issue in current year
Cl. Bal 11,400 3,000 current year profit
Total 14,700 14,700

600,000
(refer net equity t-account)

1,846 646
ovision(balancing figure)

in current year