Awnings Inc.has beginning net fixed assets of $234,100 and ending net fixed assets of $243,600.Assets valued at $42,500 were sold during the year.Depreciation was $62,500.What is the amount of net capital spending?
A)−$42,500
B)$9,500
C)$72,000
D)$53,000
E)$29,500

Question

Quizplus · Accepted Answer

Net capital spending is calculated as ending net fixed assets minus beginning net fixed assets plus depreciation minus assets sold. So, $243,600 - $234,100 + $62,500 - $42,500 = $29,500. However, the correct calculation for net capital spending should actually consider the addition of new assets, which is reflected in the increase in net fixed assets and the depreciation. The correct formula is: Ending net fixed assets - Beginning net fixed assets + Depreciation = Net capital spending, if we ignore the sale of assets for a moment. Given the sale of assets, the correct approach to find the net capital spending is to add back the depreciation to find the total spending on new assets and adjustments for sold assets. Therefore, the correct calculation is: ($243,600 - $234,100) + $62,500 = $72,000. This accounts for both the purchase of new assets and the depreciation expense, giving a more accurate figure of the capital spending.