Question

The Blue Bonnet's 2010 balance sheet showed net fixed assets of $2.2 million, and the 2011 balance sheet showed net fixed assets of $2.6 million. The company's income statement showed a depreciation expense of $900,000. What was the amount of the net capital spending for 2011?

Answer 1

$1,300,000

Step-by-step explanation:

The movement in a fixed asset account is usually based on; depreciation, additions to asset, disposal, write offs and transfers from Capital work in progress.

Given

Opening fixed asset balance = $2.2 million

Net fixed asset -ending = 2.6 million

Depreciation = $900,000

The net capital spending consisting of disposals and acquisition of assets be x

Then

2,200,000 + x - 900,000 = 2,600,000

x = 900,000 + 2,600,000 - 2,200,000

x = $1,300,000

The amount of the net capital spending for 2011 is $1,300,000.