At 1 June 2018, the property, plant and equipment (PPE) of Alba Limited had a carrying value of £848,149. During the year ended 31 May 2019, depreciation of £248,322 was charged on PPE and the company sold various items of PPE with a carrying amount of £34,977 at the date of disposal. At 31 May 2019, the PPE had a carrying amount of £685,482. At 1 June 2018, trade payables for purchases of PPE amounted to £20,351. At 31 May 2019, trade payables for purchases of PPE totaled up to £15,419.
Based on this information, what figure for cash payments to acquire property, plant and equipment will appear in the statement of cash flows of Alba Limited for the financial year ended 31 May 2019?

Question

Quizplus · Accepted Answer

To calculate cash payments to acquire property, plant and equipment, we start with the opening carrying value of PPE and adjust for depreciation, disposals, and the closing carrying value to find the additions. Then, we adjust for changes in trade payables related to PPE purchases to find the cash payments.1. Opening carrying value of PPE: £848,1492. Less: Depreciation: £248,3223. Less: Disposals: £34,9774. Add: Closing carrying value of PPE: £685,4825. Additions during the year = £685,482 - (£848,149 - £248,322 - £34,977) = £120,6326. Adjust for change in trade payables for PPE: Opening payables £20,351, Closing payables £15,419, Decrease in payables = £20,351 - £15,419 = £4,9327. Cash payments for PPE = Additions + Decrease in payables = £120,632 + £4,932 = £125,564

At 1 June 2018, the Property, Plant and Equipment (PPE)