Question : Verma Ltd. paid Rs.1,20,000 as an installment for machinery purchased on credit which included interest of Rs. 20,000. How will this payment be presented while preparing a Cash Flow Statement?
Option 1: Principal amount i.e., Rs. 1,00,000 will be classified as an investing activity whereas interest amount i.e., Rs. 20,000 will be classified as financing activity.
Option 2: Principal amount i.e., Rs. 1,200,000 will be classified as an investing activity whereas interest amount i.e., Rs. 20,000 will be classified as financing activity.
Option 3: Principal amount i.e., Rs.50,000 will be classified as an investing activity whereas interest amount i.e., Rs. 10,000 will be classified as financing activity.
Option 4: None of the above
Correct Answer: Principal amount i.e., Rs. 1,00,000 will be classified as an investing activity whereas interest amount i.e., Rs. 20,000 will be classified as financing activity.
Solution : Answer = Principal amount i.e., Rs. 1,00,000 will be classified as an investing activity whereas interest amount i.e., Rs. 20,000 will be classified as a financing activity.
While preparing the Cash Flow Statement, the payment of Rs. 1,20,000 by Verma Ltd. for machinery installment, which includes Rs. 20,000 interest, will be classified as follows: the principal amount (Rs. 1,00,000) as an investing activity and the interest amount (Rs. 20,000) as a financing activity. Hence, the correct option is 1.
Question : AbC Ltd. purchased machinery of Rs. 20,00,000 issuing a cheque of Rs. 5,00,000 and 10% Debentures of Rs. 15,00,000. In the Cash Flow Statement, the transaction will be shown as
Option 1: Outflow under Investing Activity Rs. 20,00,000, inflow under Financing Activity as Receipt for Debentures Rs. 15,00,000
Option 2: Outflow under investing Activity Rs. 5,00,000
Option 3: Inflow of Rs. 15,00,000 as Financing Activity.
Question : Prince Ltd. purchased machinery of Rs.10,00,000 issuing a cheque of Rs.2,50,000 and 10% Debentures of Rs.7,50,000. In the Cash Flow Statement, the transaction will be shown as _____.
Option 1: Outflow under Investing Activity Rs.10,00,000, inflow under Financing Activity as Receipt for debentures Rs.7,50,000.
Option 2: Outflow under Investing Activity Rs.2,50,000
Option 3: Inflow of Rs.7,50,000 as Financing Activity
Question : IDFC Bank Ltd. issued 1,00,000, 9% Debentures of Rs.100 each for subscription. The issue was subscribed. The amount of receipt will be shown as __________.
Option 1: Investing Activity
Option 2: Operating Activity
Option 3: Financing Activity
Option 4: General Activity
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