From the following particulars, calculate cash flows from investing activities: Purchased Rs. Sold Rs. Plant 4,40,000 50,000; Investments 1,80,000 1,00,000; Goodwill 2,00,000; Patents 1,00,000. Interest received on debentures held as investment Rs. 60,000. Dividend received on shares held as investment Rs. 10,000. A plot of land had been purchased for investment purposes and was let out for commercial use and rent received Rs. 30,000.
Cash Flow from Investing Activities
| Particulars | Amount (Rs.) | Amount (Rs.) |
|---|---|---|
| Purchase of Plant | (4,40,000) | |
| Sale of Plant | 50,000 | |
| Purchase of Investments | (1,80,000) | |
| Sale of Investments | 1,00,000 | |
| Purchase of Goodwill | (2,00,000) | |
| Sale of Patents | 1,00,000 | |
| Interest received on debentures held as investment | 60,000 | |
| Dividend received on shares held as investment | 10,000 | |
| Rent received on land held for investment | 30,000 | |
| Net Cash Flow from Investing Activities | (4,70,000) |
Explanation
The solution calculates the net cash flow from investing activities by identifying all inflows and outflows related to assets and investments. As per the context provided, items like 'Purchase of new equipment' and 'Purchase of investments' are treated as outflows (negative), while 'Proceeds from sale' are treated as inflows (positive). Interest and dividend received on investments, along with rent received on investment property, are classified as investing activities inflows.
Solution Steps
Step 1: Identify Outflows (Payments for purchase of assets). Purchase of Plant (Rs. 4,40,000) + Purchase of Investments (Rs. 1,80,000) + Purchase of Goodwill (Rs. 2,00,000) = Rs. 8,20,000 (Outflow).
Step 2: Identify Inflows (Receipts from sale of assets and income on investments). Sale of Plant (Rs. 50,000) + Sale of Investments (Rs. 1,00,000) + Sale of Patents (Rs. 1,00,000) + Interest Received (Rs. 60,000) + Dividend Received (Rs. 10,000) + Rent Received (Rs. 30,000) = Rs. 3,50,000 (Inflow).
Step 3: Calculate Net Cash Flow. Total Inflows (Rs. 3,50,000) - Total Outflows (Rs. 8,20,000) = Rs. (4,70,000).