Discuss CIMA CIMAPRA19-F01-1 Exam Topic 5 Question 52

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 figure should be included within cash flows from investing activities for the proceeds of sale of plant and equipment?

A$55 million

B$95 million

C$80 million

D$120 million

Suggested Answer: A

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10 comments · newest first

An 12 months ago

Totally agree, $95 million makes sense!

Elvera 12 months ago

Wait, how do we get to that figure? Sounds off.

Beata 1 year ago

I think it should be $95 million.

Royal 1 year ago

So, the original cost was $100 million, right?

Novella 1 year ago

The loss on sale was $20 million.

Eugene 1 year ago

I believe the depreciation charged would reduce the carrying amount, so maybe the proceeds could be $95 million if we consider how much was depreciated before the sale.

Nan 1 year ago

If the plant cost $100 million and we lost $20 million, does that mean the proceeds are $80 million? I’m a bit confused about the depreciation part.

Zena 1 year ago

I remember a similar question where we had to calculate proceeds after considering depreciation. I think we need to factor that in here too.

Bethanie 1 year ago

I think the loss on the sale of the plant was $20 million, but I'm not sure how that affects the proceeds.

Sherill 1 year ago

Hmm, this seems like a tricky one. I'll need to think through the relationship between the objects and how the access is currently set up.

CIMAPRA19-F01-1 Exam - Topic 5 Question 52 Discussion