Question

in its year 5 annual report, allen company reports the following (in thousands): year 5 year 4 total revenue $82,000 $79,520 property, plant, equipment, gross 33,040 30,960 property, plant, equipment, net 13,232 11,924 depreciation expense 1,548 1,324 if revenue growth is projected to be 5%, the year 6 forecasted depreciation expense to be added back on the statement of cash flows is: select one: a. $1,718 thousand b. $1,625 thousand c. $1,548 thousand d. $1,652 thousand e. none of these are correct

Answer 1

The forecasted depreciation expense to be added back on the statement of cash flows for year 6, with a 5% revenue growth, is calculated by applying the growth rate to the year 5 depreciation expense, which comes to $1,625.4 thousand. The closest available answer choice is b. $1,625 thousand.

Step-by-step explanation:

The question is asking to forecast the depreciation expense to be added back on the statement of cash flows for year 6, assuming a 5% revenue growth from year 5.

To project the depreciation expense for year 6, we need to apply the given growth rate to the year 5 depreciation expense. The calculation is as follows:

Year 6 forecasted depreciation expense = Year 5 Depreciation Expense × (1 + Projected Growth Rate)

Year 6 forecasted depreciation expense = $1,548 thousand × (1 + 0.05)

Year 6 forecasted depreciation expense = $1,548 thousand × 1.05

Year 6 forecasted depreciation expense = $1,625.4 thousand

Therefore, the closest answer from the options provided is b. $1,625 thousand.