Cash Flow

Dear Justin,

For the above adjustments you have to prepare 3 accounts namely- Land A/c, building & equipment A/c and Accumulated Depreciation A/c…

Land A/c

To Bal. B/d 480000

By bal.c/d 960000

To bank(purchase) 480000

{b.f}

Total 960000

Building & equipment A/c

To bal. b/d 3600000	By bank (sale) 240000 {720000 cost- 480000 dep}
To bank (purchase) 2880000 {b.f}	By Accumulated dep A/c 480000
	By bal. c/d 5760000
Total 6480000	Total 6480000

Accumulated Dep. A/c

To Building & equipment 480000

{ t/fd. To building a/c}

[b.f]

By bal. b/d 1200000

To bal. c/d 1320000

By p&l ( current year) 600000

Total 1800000

Now you have to disclose these adjustments to different places of CFS.

1- Purchase of Land(480000) will go to cash outflow in investing activity.

2- Purchase of building & equipment(2880000) will go to cash ouflow in investing activity.

3- Sale of building and equipment(240000+120000) will go to cash inflow in investing activity and its profit of 120000 will also be deducted from n/p before tax in order to get operating profit before working capital changes…

4- Current year dep. Of 600000 will be added to n/p before taxation to get operating profit before working capital changes…