Introductory example – gain on disposal of an item of property, plant, or equipment
On Dec 31, 01, entity E sells a machine for CU 10. Payment is effected in cash on the same day. On the same day, the machine”s carrying amount is CU 9. This results in the following entry in which the gain on disposal is recognized on a net basis (IAS 1.34a):
|
Dec 31,01 |
Dr |
Cash |
10 |
|
|
Cr |
Machine |
9 |
||
|
Cr |
Gain on Disposal |
1 |
E”s profit for 01 (which includes the gain on disposal of the machine) is CU 100.
Required
Illustrate the effects of the disposal of the machine on E”s statement of cash flows. E presents its cash flows from operating activities according to the indirect method. Ignore tax effects.
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