DFS June 2009

jewels.p

I have been looking at the Cash Flow Statement on June 09 Paper and tried to work out the amount for Purchases of PPE.

I used a T Account and did the following

Dr bal b f/wd £21,340,000 Cr Disposal £764,000

Cr bal c f/wd £27,570,000 and in order to make it balance got a Purchase Figure of £6,994,000 but the answer is £10,116 can anyone tell me where I have gone wrong on this?

Cheers

Londina

if I find the answer of that exams somewhere, I will be able to help you. Which task exactly you are talking about, Task 1.6?

jewels.p

Londina wrote: »

if I find the answer of that exams somewhere, I will be able to help you. Which task exactly you are talking about, Task 1.6?

Yes that's right 1.6

Thanks Londina

P.S Maybe if I pay you enough you could sit my exam for me!

crispy

Hello,

A T-Account for the PPE could look something like this:

Bal B/f..............21,340 Depreciation............3,469
*Additions.........10,116 NBV Of Disposal..........417
.................................Bal C/f..................27,570

.......................31,456............................31,456

The Additions figure is the balancing amount - hope this helps

jewels.p

crispy wrote: »

Hello,

A T-Account for the PPE could look something like this:

Bal B/f..............21,340 Depreciation............3,469
*Additions.........10,116 NBV Of Disposal..........417
.................................Bal C/f..................27,570

.......................31,456............................31,456

The Additions figure is the balancing amount - hope this helps

I thought it was the Cost Price you used for the disposal?

Londina

to get £10,116 I usually calculate:

the difference between fixed assets £6230 (27570 - 21340)
+
depreciation £3469
+
NBV £417
=
£10116

crispy

Hello,

Remember that the PPE figure on the balance sheet includes depreciation, therefore to calclulate any additions to the year you would need to include it.

Another method to work out value of any additions (if you don't like T-Accounts)

PPE Balance C/f: X
Less: PPE Balance B/f: (X)

Add:
Depreciation Charge: X
NBV of Disposal: X

Additions for the year: X (Sum of above)

eg.
PPE C/f: .......27,570
PPE B/f: ......(21,340)
.....................6,230

Depn. charge....3,469
NBV Disposal........417

Additions.........10,116

Find the technique you are comfortable with and this part of cash-flows should not be a problem.

Londina

jewels.p wrote: »

I thought it was the Cost Price you used for the disposal?

The tasks says: Property, plant and equipment costing £764,000, with accumulated depreciation of £347,000, were sold in the year.

So you need to use the NBV (ie. 417,000), not the cost price to calculate the fixed assets in the cash flow statement.

jewels.p

Thanks guys