Using the assumptions and information below calculate the company's gross PP&E at the end of the year.
Beginning gross PP&E: 100
Beginning accumulated depreciation: (70)
Beginning net PP&E: 30
Sales: 100
Capex % of sales: 10%
Depreciation % of last year's net PP&E : 20%
Original cost of sales % of beginning gross PP&E: 20%
Accumulated depreciation of sales % of original cost of sold asset: 90%
My initial guess was that the answer is 110 (Beginning gross PP&E + Capex), but I'm not entirely sure given the info on accumulated depreciation. Anyone care to shed some light on this?
Thanks
Subscribing, also not sure about this.
CFA Level 2 curriculum explains this pretty in depth. If I can find my text tonight I'll respond. I believe you have to calculate net investment first and work your way backwards with a "plug" figure but not entirely sure. Will check back on this.
Interested as well
Maybe I'm missing something but what's the "confusing" part of this question?
Still haven't figured this out. SB to anyone who can help out.
Gross pp&e is going to be your year end net pp&e plus accumulated depreciation including the most recent period. The $100mm of capex may have been invested in non-depreciable assets (land, etc.) or potentially acquisition related, which may be what this question is getting at.
I agree that the wording doesn't make much sense. I just double checked and I have written it exactly as it has been presented to me. The question appears in a "Accounting & finance diagnostic test" from Adkins Matchett & Toy that I'm supposed to complete before starting my analyst training at a BB.
Yes, that was also my guess but since there is no additional information on how Capex was spent or and the peculiar wording of the last line of information (Accumulated depreciation of sales % of original cost of sold asset), I'm not sure how to answer the question.
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