Question

For the year just ended, Ypsilanti Yak Yogurt shows an increase in its net fixed assets account of $595. The company took $200 in depreciation expense for the year. How much did the company spend on new fixed assets?

A. $835
B. $400
C. $755
D. $200
E. $795

Answer 1

To calculate the amount spent on new fixed assets, add the increase in net fixed assets ($595) to the depreciation expense ($200), which results in a total of $795 spent on new fixed assets.

Step-by-step explanation:

The question asks how much Ypsilanti Yak Yogurt spent on new fixed assets given an increase in net fixed assets of $595 and depreciation expense of $200. To find the amount spent on new fixed assets, you need to account for both the increase in net fixed assets and the depreciation expense. Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life, and it does not represent an outflow of cash, but it reduces the book value of the fixed assets. The increase in net fixed assets is the net amount by which the company's fixed assets increased after accounting for depreciation.

To find the amount spent on new fixed assets, we add the increase in net fixed assets to the depreciation expense:

1. Net increase in fixed assets: $595
2. Depreciation expense: $200
3. Total spent on new fixed assets: Net increase + Depreciation expense = $595 + $200 = $795

Therefore, the company spent $795 on new fixed assets during the year.