Cantanna Inc.,is developing a pro forma income statement for the coming year.The chief financial officer estimates that fixed assets are $70,000,000 and that sales will be $300,000,000.If depreciation is historically 20% of fixed assets,what is the expected amount of depreciation for the upcoming year (in dollars)?
A)$14,000,000
B)$20,000,000
C)$60,000,000
D)This figure cannot be reasonably estimated.

Question

Quizplus · Accepted Answer

Depreciation is calculated as 20% of fixed assets, which are $70,000,000. Therefore, the expected depreciation is 0.20 * $70,000,000 = $14,000,000.