Question

In its 2017 annual report, Allen Company reports the following (in thousands): 2017 2016 Total revenue $102,500 $99,400 Property, plant, equipment, gross 41,300 38,700 Property, plant, equipment, net 16,540 14,905 Depreciation expense 1,935 1,655 If revenue growth is projected to be 5%, the 2018 forecasted depreciation expense to be added back on the statement of cash flows is:
A. $1,935 thousand
B. $2,147 thousand
C. $1,766 thousand
D. $2,065 thousand
E. None of the above

Answer 1

Answer:

2018 forecasted depreciation expense = 2065 thousand

so correct option is D. $2,065 thousand

Explanation:

given data

                                       2017             2016

Total revenue               $102,500      $99,400

gross                               41,300          38,700

net                                   16,540          14,905

Depreciation expense     1,935           1,655

revenue growth = 5 %

to find out

2018 forecasted depreciation expense

solution

we know here Depreciation expense for 2017 is = 1935

and Divide by Property, plant, equipment, gross 2016 is = 38700

and Depreciation rate for 2017 = 5.00%

    Property, plant, equipment, gross 2017 =  41300

Depreciation rate =  5.00%

so for 2018 forecasted depreciation expense is

2018 forecasted depreciation expense = gross 2017  ×  Depreciation rate ........1

2018 forecasted depreciation expense =  41300 × 5%

2018 forecasted depreciation expense = 2065 thousand

so correct option is D. $2,065 thousand