Year 0 Ending PP&E = $145 million + $10 million – $5 million = $150 million.The ending PP&E, net balance in Year 0 amounts to $150 million, as shown by the equation below. Therefore, from $145 million, we add the $10 million in new PP&E purchases and then subtract the $5 million in depreciation expense. In Year 0, the company spent $10 million in capital expenditures (Capex) and incurred $5 million in depreciation. Suppose a company’s PP&E balance at the beginning of Year 0 is $145 million. The formula to calculate the ending PP&E balance consists of adding Capex to the beginning PP&E balance and then subtracting the depreciation expense.
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