The correct answer is: $41m.
The additions in the cash flow statement should only be additions for cash. The inception of a finance lease is not a cash transaction and must therefore be excluded. The amount of assets acquired under finance leases is calculated by looking at the movement in the liability for finance leases. As this balance represents capital only, the payment which goes into the working must exclude the interest element.
Correct answer
Additions to non-current assets:
|
|
$m |
|
Net book value 31.12.X3 |
175 |
|
Depreciation |
(42) |
|
Disposals |
(10) |
|
|
123 |
|
Net book value 31.12.X4 |
(192) |
|
Additions |
69 |
Additions acquired under finance leases:
|
|
$m |
|
Obligation at 31.12.X3 |
55 |
|
Payments (18 – 6) |
(12) |
|
|
43 |
|
Obligations at 31.12.X4 |
(71) |
|
Additions under finance leases |
28 |
Therefore additions for cash (69 – 28) = $41m
Incorrect answers
Additions under finance leases
|
|
$m |
|
Obligations at 31.12.X3 |
55 |
|
Payments |
(18) |
|
|
37 |
|
Obligations at 31.12.X4 |
(71) |
|
Additions |
34 |
Therefore additions for cash (69 – 34) = $35m.
No adjustment made for the additions under finance leases.
Additions under finance leases
|
|
$m |
|
Obligations at 31.12.X3 |
55 |
|
Obligations at 31.12.X4 |
(71) |
|
Additions |
16 |
Therefore additions for cash (69 – 16) = $53m.
Additions acquired under finance leases:
|
|
$m |
|
Obligation at 31.12.X3 |
45 |
|
Payments (18 – 6) |
(12) |
|
|
33 |
|
Obligations at 31.12.X4 |
(51) |
|
Additions under finance leases |
18 |
Therefore additions for cash (69 – 18) = $51m
