Cash flow from investing P&E

CFA Level I
#1

Why r we adding gross cost of of PE sold to the equation??:

P&E Purchased = P&E beginning -P&E end + gross cost of of PE sold.

Wouldnt the sub. beginning and the end P& E be sufficient to answer the PE purchased during a particular year.

Schwzer 2015 exam edition PG 120.

#2

I am not familer with the topic , but just looking at it , I can give few comments.

Take example

opening PV- 100

Closing PV- 110

. You mean to say the PV purchased = 100-110= -10

It is incorrect , as you might have purachased 150, able to sold 140 that why the remainning is 110(100+150-140)

but with your way you will get answer of 10 only

#3

You have to calculate an asset depreciation in period so gross cost of PPE sold is required. This is the simplest accounting way to reduce potential errors.

#4

Can you please give an example

#5

Here is the link where you can find explanations about booking entries:

http://www.double-entry-bookkeeping.com/fixed-assets/disposal-of-fixed-assets/

#6

PPE beginning balance = open balance usual on 01/01 of assets of same kind in BS (gross by historical purchasing value, net reduced by accumulated depreciation allowance account)

PPE ending balance = beginn. balance - accum.depreciation + new asset puchased during year balances - assets disposed (sold) during year

PPE purchased = PPE beginn. balance - PPE ending balance + (asset disposed + accum. depreciation or gross cost of asset sold).