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PAPER 1 : ACCOUNTING

Purchase of machinery

19

(46,000)

Net cash used in investing activities

(36,000)

C. Cash flow from Financing Activities

Redemption of debentures (` 40,000 ` 1,600)
Payment of dividend

(38,400)

Payment of interest on debentures

(14,400)

(60,000)

Net cash used financing activities

Net decrease in cash and cash equivalents during the year

(1,12,800)
(10,000)

Cash and cash equivalents at the beginning of the year

1,20,000

Cash and cash equivalents at the end of the year

1,10,000

Working Notes:
1.

Depreciation Fund

`
To
To

Machinery A/c
Balance c/d

16,000 By Balance b/d

88,000 By Profit and Loss A/c

80,000
24,000

(Current year depreciation)

1,04,000
2.

1,04,000

Machinery A/c

`
To Balance b/d
To Bank (Purchased)

1,64,000 By Depreciation Fund

46,000 By Bank (realized on sale of old
machinery
By Profit and loss A/c (loss on
sale) Balancing Fig
By Balance c/d
2,10,000

3.

16,000
10,000
4,000
1,80,000
2,10,000

(a) Sales of first 6 months = ` 4,80,000. Average sale of first 6 months = ` 4,80,000/6
= ` 80,000 per month. Pre-incorporation period consist of 3 months (i.e., April, May
and June). The sales of those 3 months = ` 80,000 x 3 = ` 2,40,000. Sales of
remaining 9 months = ` 24,00,000 ` 2,40,000 = ` 21,60,000.
Therefore, the ratio of sales = ` 2,40,000 : ` 21,60,000 or 1: 9.
(b) Let the average of monthly sales = X. The sales of different months can be shown
as follows:

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