Multiple choice

A machinery is purchased on long term credit for Rs. 1, 00,000 on 1st January 2010. The depreciation till 30th June 2010 is Rs. 5,000. It is sold on 30th June 2010 at a loss of Rs. 4,000 for cash. What will be the resultant net cash flow?

  1. Inflow of cash of Rs. 90,000

  2. Outflow of cash of Rs. 91,000

  3. Inflow of cash of Rs. 91,000

  4. Decrease in working capital by Rs. 4,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

It would result in inflow of cash of Rs. 91,000.
Since the machine is purchased for Rs. 1,00,000 and the depreciation till 30th June is Rs. 5,000. Hence, the value of machinery on 30th June is (Purchase price -  Depreciation), hence value is, (Rs. 1, 00,000 -  Rs. 5,000 Rs.=  95,000) It is sold at a loss of Rs. 4,000. Hence, the selling price would be Value Loss. Value = Rs. 95,000 Loss = Rs. 4,000 Hence, selling price would be 95000 - 4000 = Rs. 91000

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