MENU
The following information is extracted from the statement of financial position for ZZ at 31 March 20X3:
Included within cost of sales in the statement of profit or loss for the year ended 31 March 20X3 is $20 million relating to the loss on the sale of plant and equipment which had cost $100 million in June 20X1.
Depreciation is charged on all plant and equipment at 25% on a straight line basis with a full year's depreciation charged in the year of acquisition and none in the year of sale.
The revaluation reserve relates to the revaluation of ZZ's property.
The total depreciation charge for property, plant and equipment in ZZ's statement of profit of loss for the year ended 31 March 20X3 is $80 million.
The corporate income tax expense in ZZ's statement of profit or loss for year ended 31 March 20X3 is $28 million.
ZZ is preparing its statement of cash flows for the year ended 31 March 20X3.
What cash outflow figure should be included within cash flows from investing activities for the purchase of property, plant and equipment?
Suggested Answer: A, B
Get Premium CIMAPRA19-F01-1 Questions
as Interactive Web-Based Practice Test or PDF
Real Exam Format
Detailed Explanations
Instant Access
Get Your Practice Test
36 comments · newest first
RA
Raelene
10 months ago
Wait, how does depreciation factor into this?
LO
Lorean
10 months ago
Totally agree, that impacts the cash flow!
TA
Tawanna
11 months ago
I think the cash outflow should be $110 million.
TH
Thaddeus
11 months ago
$210 million seems way too high for just the purchase!
ED
Eden
11 months ago
The loss on the sale of plant was $20 million.
LE
Leonora
11 months ago
I think we need to add the loss on the sale to the purchase amount, but I'm confused about whether to include the depreciation in this calculation.
KA
Karma
12 months ago
I feel like the answer might be $110 million, but I can't quite recall how the depreciation plays into the cash outflow for new purchases.
MY
Myra
12 months ago
This question is similar to one we practiced where we had to adjust for depreciation and losses. I think we need to consider the total cost of new purchases.
SH
Sheridan
12 months ago
I remember we discussed how to calculate cash flows from investing activities, but I'm not sure how the loss on the sale of equipment affects the purchase figure.
AM
Amalia
1 year ago
Wait, I'm not sure I'm following the logic here. The question is asking for the cash outflow, but the information provided is focused on the statement of profit or loss. I'll need to re-read this a few times to make sure I'm not missing anything.
DE
Deeann
1 year ago
Okay, I think I've got it. The total depreciation charge of $80 million means the cash outflow for property, plant and equipment must be $110 million. I'm feeling confident about this one.
GL
Gladys
1 year ago
Hmm, I'm a bit confused by the details around the loss on the sale of plant and equipment. I'll need to make sure I understand how that impacts the overall property, plant and equipment balance before I can answer this.
TI
Tijuana
1 year ago
This question looks pretty straightforward. I'll need to calculate the total cost of property, plant and equipment based on the information provided and then subtract the depreciation to get the cash outflow figure.
BR
Brittni
1 year ago
Wait, did they really throw in a revaluation reserve just to confuse us? That's a classic move by the CIMA examiners.
EL
Elza
1 year ago
Exactly, it's all about understanding how those numbers flow in the financial statements.
AN
Annice
1 year ago
That makes sense, considering the depreciation charge and the loss on the sale of plant and equipment.
ME
Merilyn
1 year ago
I think the cash outflow figure for the purchase of property, plant and equipment should be $110 million.
JE
Jettie
1 year ago
I know right, they always try to trick us with those extra details.
BE
Berry
1 year ago
Alright, let's see if I can work this out step-by-step. I'm going to need to use my calculator for this one.
AU
Augustine
1 year ago
C) $185 million
VE
Velda
1 year ago
B) $110 million
RU
Ruthann
1 year ago
A) $85 million
EF
Effie
1 year ago
Haha, the corporate income tax expense is a red herring in this question. It's not relevant to determining the cash outflow for the purchase of property, plant, and equipment.
TA
Tashia
1 year ago
I think the correct answer for the cash outflow figure from investing activities is $110 million.
TA
Tashia
1 year ago
So, we should focus on the depreciation and the loss on the sale of plant and equipment to calculate the cash outflow for investing activities.
TA
Tashia
1 year ago
You're right, the corporate income tax expense doesn't affect the cash outflow for purchasing property, plant, and equipment.
LI
Lizbeth
1 year ago
The information given about depreciation and the loss on the sale of plant and equipment is really crucial in solving this problem. I need to be careful in calculating the correct figure.
QU
Quentin
1 year ago
B) $110 million
VI
Virgina
1 year ago
I think the correct figure should be $85 million.
HE
Herschel
1 year ago
A) $85 million
LA
Latonia
2 years ago
But the cost of sales included a loss on the sale of plant and equipment, so it should be $85 million.
PE
Pearlene
2 years ago
I disagree, I believe the answer is B) $110 million.
LI
Linwood
2 years ago
This question is all about analyzing the statement of financial position and statement of profit or loss to determine the cash outflow for the purchase of property, plant, and equipment. I think I've got this one figured out!
BE
Bette
1 year ago
Yes, you are correct! The correct answer is indeed $110 million, option B.
BE
Bette
1 year ago
I believe the cash outflow figure for the purchase of property, plant, and equipment should be $110 million, option B.
LA
Latonia
2 years ago
I think the answer is A) $85 million.