From the following Particulars, calculate cash flow from investing activities:-
A plot of land been purchased for investment purpose and was let out for commercial use and rent received ₹30,000.
Interest paid on debentures ₹60,000
Purchase of Plant ₹4,40,000
Goodwill written off ₹20,000
Sale of Land ₹5,00,000
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → ₹90,000
Only cash flows from buying and selling long-term assets and investments, and the income from those investments, are investing activities.
Rent received from land held as an investment = ₹30,000 (inflow)
Purchase of plant = (₹4,40,000) (outflow)
Sale of land = ₹5,00,000 (inflow)
Net cash from investing activities = ₹30,000 − ₹4,40,000 + ₹5,00,000 = ₹90,000
Left out: interest paid on debentures (₹60,000) is a financing activity, and goodwill written off (₹20,000) is a non-cash item.