Comprehension Passage
For each of the following transactions, calculate the resulting cash flow and state the nature of cash flow, viz., operating, investing and financing.
(a) Acquired machinery for Rs. 2,50,000 paying 20% by cheque and executing a bond for the balance payable.
(b) Paid Rs. 2,50,000 to acquire shares in Informa Tech. and received a dividend of Rs. 50,000 after the acquisition.
(c) Sold machinery of original cost Rs. 2,00,000 with an accumulated depreciation of Rs. 1,60,000 for Rs. 60,000.
What is the gain or loss on sale of machinery in the transaction (c), and does it affect cash flow?
1
Rs. 40,000 loss – Affects investing cash flow
2
Rs. 20,000 gain – Does not affect cash flow directly
3
Rs. 20,000 gain – Adds to investing inflow
4
No gain or loss – Only affects financing cash flow