ABC Ltd. has given you the following information:

During the year, a Machine costing Rs. 25,000 with Accumulated Depreciation of Rs. 15,000 was sold for Rs. 13,000. Calculate cash flow from Investing Activities on the basis of the above information.

Rs. 22,000 Outflow

The correct answer is Option (1) → Rs. 22,000 Outflow 

$$\text{Book Value}=\text{Cost}-\text{Accumulated Depreciation}=25,000-15,000=10,000$$

Profit on Sale = 13,000 - 10,000 = Rs. 3,000

Find Purchase of Machinery during the Year:

Opening Balance+Purchases−Cost of Machinery Sold = Closing Balance

50,000 + Purchases − 25,000 = 60,000

Purchases=60,000−25,000+25,000 = 35,000

Cash Flow from Investing Activities=Sale Proceeds − Purchase of Machinery

                                                           =13,000−35,000

                                                           =−22,000

Since the result is negative (a net payment was made), it represents a Cash Outflow.