Calculate nonoperating Cash outflow

with the capex Sale of Asset: Beg Net PP&E + Purchases -Depr Exp. - BV Sold = End Net PP&E 2000 + 500 – 200 –BV = 2250 Therefore: BV = 50 Gain = 20 (given in footnotes, on NI line) So Sale Price = 70 This Sale price would be used on the CFI Calculation, as an inflow. while the (500) would figure there as an outflow.

^ that’s presicely how I tried to achieve it, but there were 2 unknown variables (as I didn’t know capital expenditure was a part of the initial problem)… Thanks cpk. - Dinesh S

cpk123, i like your approach to coming up with the sale price. very smart!

cpk123 Wrote: ------------------------------------------------------- > with the capex > > Sale of Asset: > Beg Net PP&E + Purchases -Depr Exp. - BV Sold = > End Net PP&E > 2000 + 500 – 200 –BV = 2250 > Therefore: BV = 50 > > Gain = 20 (given in footnotes, on NI line) > > So Sale Price = 70 > This Sale price would be used on the CFI > Calculation, as an inflow. > while the (500) would figure there as an outflow. This is great! I have one question. Accumulated depriciation increased by 150. But Depreciation expense is 200. What is the reason for the 50 difference?

The Accumulated depreciation is after the Sold Equipment depreciation is taken off. The depreciation expense on the income statement is what the company actually incurred, (which would be inclusive of what had been spent on the sold equipment). That is the reason why for depreciation expense we must look at the Income statement.

So it is not a coincidence that the difference happens to be 50 which is equal to BV for the equipment sold. Does this give us a short cut? Or we can not assume the entire remaining BV50 will be depreciated in one year.

I am not sure about that whether this shortcut is always the case. In either case - for a question where they ask for only CFO or like the example above where the “non-operational Cash outflows” was asked, you would have to go thro’ extra hoops to figure out the BV (Sold) and then add to the “Depreciation change”… which might be too much!