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12 September, 11:22

Earnhardt Driving School's 2008 balance sheet showed net fixed assets of $4 million, and the 2009 balance sheet showed net fixed assets of $6.2 million. The company's 2009 income statement showed a depreciation expense of $785,000. What was net capital spending for 2009?

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  1. 12 September, 14:28
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    Net capital spending = $2,985,000

    Explanation:

    There are two financial years in consideration

    They are 2008 and 2009

    Closing values of 2008 = Opening values of 2009

    Now, closing value of net assets at 2008 = $4 million

    Closing value of net assets for 2009 = $6.2 million

    Net capital spending = Gross fixed assets at year end - Opening fixed assets

    Gross fixed assets = Net Value + Depreciation

    = $6.2 million + $785,000

    = $6,985,000

    Thus, Net capital spending in 2009 = $6,985,000 - $4,000,000

    = $2,985,000
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