Question

Earnhardt Driving School's 2008 balance sheet showed net fixed assets of $4 million, and the 2009 balance sheet showed net fixed assets of $6.2 million. The company's 2009 income statement showed a depreciation expense of $785,000. What was net capital spending for 2009?

Answer 1

Net capital spending = $2,985,000

Step-by-step explanation:

There are two financial years in consideration

They are 2008 and 2009

Closing values of 2008 = Opening values of 2009

Now, closing value of net assets at 2008 = $4 million

Closing value of net assets for 2009 = $6.2 million

Net capital spending = Gross fixed assets at year end - Opening fixed assets

Gross fixed assets = Net Value + Depreciation

= $6.2 million + $785,000

= $6,985,000

Thus, Net capital spending in 2009 = $6,985,000 - $4,000,000

= $2,985,000