ABC Ltd has provided the following information:
On April 1, 2018
Machinery ₹5,00,000
Accumulated Depreciation ₹2,50,000
On March 31, 2019
Machinery ₹6,00,000
Accumulated Depreciation ₹1,50,000
During the year machine costing ₹2,50,000 (depreciation charged ₹1,50,000) was sold for ₹1,30,000.
Calculate cash flow from investing activities on the basis of above information.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Cash used ₹2,20,000
Purchase of machinery is found from the Machinery Account at cost; accumulated depreciation does not affect cash. The sale proceeds are an investing inflow.
Purchase = Closing cost + Cost of machine sold − Opening cost
= ₹6,00,000 + ₹2,50,000 − ₹5,00,000 = ₹3,50,000 (outflow)
Sale of machine = ₹1,30,000 (inflow)
Net cash used in investing activities = ₹3,50,000 − ₹1,30,000 = ₹2,20,000
NCERT (2026-27 edition):
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