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)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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)

Expert Solution

Working:

Total cost of the machine = Purchase price + Delivery and installation costs

= $50,000 +$60000

= $56000

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