Z Limited purchases an asset for $50,000 from CashCrow Company on 1 January 2015 for cash. Z Ltd also pays for delivery of the machine and installation of the machine which cost $6,000 Record the purchase of the machine for Z Ltd Z Ltd expects to use this machine for a period of 10 years and the machine is expected to have a residual value of $2,000 Record depreciation on this machine for the year ended 31/12/2015 How Is the purchase of this machine reflected in the cashflow statement of: CashCrow Company for the year ended 31/12/2015? – cash inflow investing activities ($50,000) Z Ltd for the year ended 31/12/2015 – cash outflow investing activities ($56,000)
Z Limited purchases an asset for $50,000 from CashCrow Company on 1 January 2015 for cash. Z Ltd also pays for delivery of the machine and installation of the machine which cost $6,000 Record the purchase of the machine for Z Ltd Z Ltd expects to use this machine for a period of 10 years and the machine is expected to have a residual value of $2,000 Record depreciation on this machine for the year ended 31/12/2015 How Is the purchase of this machine reflected in the cashflow statement of: CashCrow Company for the year ended 31/12/2015? – cash inflow investing activities ($50,000) Z Ltd for the year ended 31/12/2015 – cash outflow investing activities ($56,000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Working:
Total cost of the machine = Purchase price + Delivery and installation costs
= $50,000 +$60000
= $56000
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