Blockbuster is a video rental and retail chain. Blockbuster is forecasting its financial statements for Year 3. Selected financial information for Years 1 and 2 is provided in the table. In Year 3 Blockbuster is planning to invest $400,000 thousand in CAPEX. The average depreciation rate is 25%. What is the forecasted depreciation expense in Year 3? Selected Financial Information
Blockbuster Inc. ($ '000)
$$\begin{array} { | c | c | c | }
\hline & \text { Year 1 } & \text { Year 2 } \
\hline \text { PP\&E } & \$ 1,009,300 & \$ 919,000 \
\hline \text { Depreciation } & & 252,325 \
\hline \text { CAPEX } & & 162,025 \
\hline
\end{array}$$

Question

Blockbuster is a video rental and retail chain. Blockbuster is forecasting its financial statements for Year 3. Selected financial information for Years 1 and 2 is provided in the table. In Year 3 Blockbuster is planning to invest $400,000 thousand in CAPEX. The average depreciation rate is 25%. What is the forecasted depreciation expense in Year 3? Selected Financial Information
Blockbuster Inc. ($ '000)
$$\begin{array} { | c | c | c | } 
\hline & \text { Year 1 } & \text { Year 2 } \
\hline \text { PP\&E } & \$ 1,009,300 & \$ 919,000 \
\hline \text { Depreciation } & & 252,325 \
\hline \text { CAPEX } & & 162,025 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The depreciation expense for Year 3 can be calculated by applying the average depreciation rate of 25% to the sum of the Year 2 PP&E and the planned CAPEX for Year 3. This is calculated as follows: (Year 2 PP&E + Year 3 CAPEX) * Depreciation Rate = ($919,000 + $400,000) * 0.25 = $329,750.

Blockbuster Is a Video Rental and Retail Chain A)$207,175 B)$270,256 C)$329,750 D)$314,526 E)$455,300

Blockbuster Is a Video Rental and Retail Chain A)$207,175
B)$270,256
C)$329,750
D)$314,526
E)$455,300