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Model Test Papers M.379

Add: Non-operating and Non-cash Items:
Depreciation 25,000
Interest on Debentures (12% of ` 80,000) 9,600
Premium on Redemption of Debentures (` 20,000 × 5/100) 1,000 35,600
68,600
Less: Gain (Profit) on Sale of Machinery 7,000
Operating Profit before Working Capital Changes 61,600
Add: Increase in Current Liabilities:
Trade Payables 1,05,000
1,66,600
Less: Increase in Current Assets:
Inventories 22,000
Trade Receivables 20,000 42,000
Cash Generated from Operations 1,24,600
Less: Tax Paid 15,000
Cash Flow from Operating Activities 1,09,600
II. Cash Flow from Investing Activities
Purchase of Machinery (1,40,000)
Proceeds from Sale of Machinery 12,000
Proceeds from Sale of Non-current Investments 12,000
Cash Used in Investing Activities (1,16,000)
III. Cash Flow from Financing Activities
Proceeds from Issue of Equity Shares (Including Premium) 55,000
Share Issue Expenses (5,000)
Redemption of Debentures at Premium (21,000)
Payment of Interest on Debentures (9,600)
Repayment of Bank Loan (10,000)
Cash Flow from Financing Activities 9,400
IV. Net Increase in Cash and Cash Equivalents (I + II + III) 3,000
V. Add: Cash and Cash Equivalents in the beginning of the period 1,15,000
VI. Cash and Cash Equivalents at the end of the period (IV + V) 1,18,000

Working Notes:
1. Dr. MACHINERY ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d 3,50,000 By Accumulated Depreciation A/c 15,000
To Gain (Profit) on Sale of Machinery A/c* 7,000 By Bank A/c (Sales proceeds) 12,000
(Statement of Profit and Loss) By Balance c/d 4,70,000
To Bank A/c (Bal. Fig.—Purchase) 1,40,000
4,97,000 4,97,000

`
*Sale Proceeds 12,000
Less: Book Value on the date of sale (i.e., ` 20,000 – ` 15,000) 5,000
Gain (Profit) on Sale of Machinery 7,000