Question

    ABC Ltd., a manufacturing company, undertook a series of

    transactions during the financial year 2024–25. It purchased a new plant worth ₹1,000 lakh and paid 60% in cash, while the remaining 40% was financed through a long-term loan from a financial institution. Additionally, it sold an old piece of equipment for ₹150 lakh, which had a book value of ₹120 lakh, resulting in a profit that was correctly recognized in the profit and loss account. The company also invested ₹200 lakh in acquiring 10% stake in a start-up and earned ₹30 lakh as dividend on its existing investment in an associate company. The dividend was credited to the profit and loss account. Further, ₹100 lakh was received as interest income from bonds held as long-term investments. Depreciation of ₹250 lakh was charged on fixed assets during the year. Based on the above information, which of the following statements is most accurate in the context of preparing the Cash Flow Statement (as per Ind AS 7)?
    A The purchase of the plant (₹1,000 lakh) is fully shown under investing activities as an outflow, even if partially financed. Correct Answer Incorrect Answer
    B Profit on sale of equipment (₹30 lakh) is shown as a cash inflow under investing activities. Correct Answer Incorrect Answer
    C The investment in the start-up, dividend received, and interest income are all investing cash flows. Correct Answer Incorrect Answer
    D Only ₹600 lakh (cash portion) of the plant purchase, ₹150 lakh from equipment sale, ₹200 lakh investment, ₹30 lakh dividend, and ₹100 lakh interest would be shown under investing activities. Correct Answer Incorrect Answer

    Solution

    • Only cash-paid portion (₹600 lakh) of plant is shown • Profit on asset sale (₹30 lakh) is non-cash → not shown in investing; only sale proceeds ₹150 lakh are shown • Investment (₹200 lakh), dividend (₹30 lakh), and interest (₹100 lakh) → all investing inflows under Ind AS 7 • Depreciation (₹250 lakh) → non-cash, part of operating activity adjustments

    Practice Next
    More Accounts Questions

    Relevant for Exams:

    ask-question