Wye Limited acquired plant and machinery for use in its business at a cost of £200,000 three years ago. The plant and machinery was estimated to have a residual value of £33,600 and an estimated useful life of 5 years. The plant and machinery has been depreciated on the reducing balance basis at the rate of 30% per annum. At the end of 3 years the plant and machinery was sold and a profit of £11,400 was made on the sale. What was the cash inflow from the sale of the plant and machinery that will be recorded under cash flows from investing activities?

Question

Quizplus · Accepted Answer

The cash inflow from the sale is calculated by adding the profit on sale (£11,400) to the net book value at the time of sale. The net book value after 3 years of depreciation at 30% reducing balance is £68,600. Therefore, the cash inflow is £68,600 + £11,400 = £80,000.

Wye Limited Acquired Plant and Machinery for Use in Its