Question

From the following particulars of Bharat Gas Limited, calculate cash flows from investing activities. Also show the workings clearly preparing the ledger accounts.
$$\begin{array}{ccc}\text{Assets}& 31-03-2015& 31-03-2016\\ \text{Goodwill}& 1,00,000& 3,00,000\\ \text{Patents}& 2,80,000& 1,60,000\\ \text{Machinery}& 10,20,000& 12,40,000\\ 10\%\text{Long term Investment}& 60,000& 1,60,000\\ \text{Investment in Land}& 1,00,000& 1,00,000\\ \text{Shares of Amartax Ltd.}& 1,00,000& 1,00,000\end{array}$$
Additional Information:
1. Patents were written off to the extent of Rs. 40,000 and some patents were sold at a profit of Rs. 20,000.
2. A Machine Cosing Rs. 1,40,000 (Depreciation provided thereon Rs. 60,000) was sold for Rs. 50,000. Depreciation charged during the year was Rs. 1,40,000.
3. On March 31, 2016, 10% Investments were purchased for Rs. 1,80,000 and some investments were sold at a profit of Rs. 20,000. Interest on Invsetment was received on March 31, 2016.
4. Amartax Ltd. Paid Dividend @ 10% on its shares.
5. A plot of land was purchased out of surplus fund for investment purposes and let out for commercial use and rent received Rs. 30,000.

Answer 1

Cash Flow from Investing Activities
$\begin{array}{ccc}\text{Particulars}& \text{Amt. (Rs.)}& \text{Amt. (Rs.)}\\ \text{Cash Inflow}& & \\ \text{Proceeds from Sale of Patents}& 1,00,000& \\ \text{Proceeds from of Machinery}& 50,000& \\ \text{Proceeds from Sale of 10}\%\text{Long-term Investment}& 1,00,000& \\ \text{Interest received on 10}\%\text{Long-term Investment}& 6,000& \\ \text{Dividend Receivad from Amartax Ltd.}& 10,000& \\ \text{Rent Received}& \underset{–}{30,000}& 2,96,000\\ \text{Cash Outflow}& & \\ \text{Purchase of Goodwill}& 2,00,000& \\ \text{Purchase of Machinery}& 4,40,000& \\ \text{Purchase of 10}\%\text{Long-term Investment.}& \underset{–}{1,80,000}& \underset{–}{8,20,000}\\ \text{Net Cash used in Investing Activities}& & \underset{–}{5,24,000}\end{array}$

Dr. Patents Account Cr.
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}& \text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}\\ & \text{Balance b/d}& & 2,80,000& & \text{Profit and}& & \\ & & & & & \text{Loss (Written off)}& & 40,000\\ & \text{Profit and Loss}& & 20,000& & \text{Bank (Sale)}& & \\ & \text{(Profit on Sale)}& & & & \text{(Balancing figure)}& & 1,00,000\\ & & & \underset{–}{}& & \text{Balance c/d}& & \underset{–}{1,60,000}\\ & & & \underset{–}{3,00,000}& & & & \underset{–}{3,00,000}\end{array}$

Dr. Machinery Account Cr.
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}& \text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}\\ & \text{Balance b/d}& & 10,20,000& & \text{Depreciation}& & 1,40,000\\ & \text{Bank (Purchase)}& & 4,40,000& & \text{Bank (Sale)}& & 50,000\\ & \text{(Balancing Figure)}& & & & & & \\ & & & & & \text{Profit and Loss}& & \\ & & & & & \text{(Loss on Sale)}& & 30,000\\ & & & & & \text{Balance c/d}& & \underset{–}{12,40,000}\\ & & & \overline{\underset{–}{14,60,000}}& & & & \underset{–}{14,60,000}\end{array}$

Working Note:
Machine costing Rs 1,40,000 less depreciation Rs 60,000, present value Rs 80,000 sold for Rs 50,000 i.e., loss on sale Rs 30,000.



Dr. $10\%$ Long Term Investment Account Cr.
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}& \text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}\\ & \text{Balance b/d}& & 60,000& & \text{Bank}& & \\ & & & & & \text{(Balancing)}& & \\ & & & & & \text{Figure)}& & 1,00,000\\ & \text{Bank}& & 1,80,000& & & & \\ & \text{Profit and Loss}& & 20,000& & \text{Balance c/d}& & 1,60,000\\ & \text{(Profit on Sale)}& & & & & & \\ & & & \underset{–}{\overline{2,60,000}}& & & & \underset{–}{\overline{2,60,000}}\end{array}$

Note:
Any income received on investment is a part of investments like dividend, interest or rent received.