DFS June 2009

jewels.p
jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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

Comments

  • Londina
    Londina Registered Posts: 814 Epic contributor 🐘
    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
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
    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! :wink:
  • crispy
    crispy Registered Posts: 465 Dedicated contributor 🦉
    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
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
    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
    Londina Registered Posts: 814 Epic contributor 🐘
    to get £10,116 I usually calculate:

    the difference between fixed assets £6230 (27570 - 21340)
    +
    depreciation £3469
    +
    NBV £417
    =
    £10116
  • crispy
    crispy Registered Posts: 465 Dedicated contributor 🦉
    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
    Londina Registered Posts: 814 Epic contributor 🐘
    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
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
    Thanks guys
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