Why do you not include depreciation in the calculation of FCInv? I’ve seen elsewhere in the material (can’t remember where I saw it) that you have to include the years depreciation when calculating the difference in Fixed Assets (e.g. FA beg-FA end + Depreciation). If nothing was sold, my method would be the actual amount of assets purchased, correct?
FCInv = Capital expenditures - gains from the sale of assets (pretty sure after taxes) To figure out what FCInv would be from BS accounts, its Gross PPE at end of period -Gross PPE at beg of period -accumulated deprecation = fixed capital investment
That question is all screwed up. They presented the FCInv weird, by showing accumulated depreciation below. I hope on the exam they would just give us the cash flow statement so we can pull it from CFI. CFAI posted errata, with that question specificlly mentioned because they calculated both WCinv and Net Borrowing incorrectly. http://www.cfainstitute.org/mycfa/candidate/Resources/studyaids/practice/Documents/2011_mock_exam_errata.pdf
piwanowi i think you mean: FCInv = ( Ending Gross PPE - Beginning Gross PPE ) - Depreciation Expense = (1425.8 - 1178) - 82.5 = 165.3
Isn’t it: beg PP&E + purchases - depreciation = ending PP&E
Andrew your way is correct when using NET PP&E: 910.80 - 828 + 82.50 = 165.30 When using gross PP&E 1425.8 - 1178 - 82.50 = 165.30 Both are correct. Usually they would just show the net PP&E on the balance sheet, but it seems that every way of throwing us off is fair game.
so then technically in this problem, they messed up because they gave us Net PPE and also said less accumulated depreciation, which is redundant. Am I just confusing myself now?
Confusing yourself. They gave us NET PPE and also GROSS PPE because they included accumulated depreciation. You can calculate FCInv with either or. Where they screwed up royally was calculating WVInv and Net Borrowing
In reading 43 page 404 the fixed assets purchased in Cash Flow from Investing is the difference in Gross fixed assets on the Balance Sheet. Even though the Balance Sheet provides accumulated depreciation, only Gross Fixed Assets are used. This suggest to me Exhibit 2 for PM #51 should have been described as “Gross Fixed Assets”.
Then the calc is Gross FA end - Gross FA beg or Net FA end - Net FA beg + dep? Cause mbolzicco says it’s you have to include depreciation in the gross FA method…
Yea so BoP Gross PPE + FCInv= EoP Gross PPE BoP Accumulated Dep + Dep = EoP Accumulated Dep (BoP Gross PPE - BoP Accumulated Dep)+(FCInv-Dep)=(EoP Gross PPE - EoP Accumulated Dep) thus BoP Net PPE + FCInv - Dep = EoP Net PPE
The last post is perfect! FCinv, when dealing with gross PPE, only takes the change in the gross amounts (you DON’T add back depreciation… this wouldn’t make any sense, this is done only with Net PPE since net refers to the fact that depreciation was deducted and hence needs to be added back to find the true investment in Fixed Assets…)
also recall that impairments do affect Net PPE and under IFRS you can writeback up but under GAAP you cannot.
I swear I have been studying calculating and recalculating this question trying to figure out why I couldn’t get this one right by starting from Net Income. Sunuvvaa! I missed the May 23rd errata. I can’t believe I wasted so much time trying to figure that out. I assumed I was doing something incorrectly. Thank goodness for the internet. mbolzicco Wrote: ------------------------------------------------------- > That question is all screwed up. They presented > the FCInv weird, by showing accumulated > depreciation below. I hope on the exam they would > just give us the cash flow statement so we can > pull it from CFI. > > CFAI posted errata, with that question specificlly > mentioned because they calculated both WCinv and > Net Borrowing incorrectly. > > http://www.cfainstitute.org/mycfa/candidate/Resour > ces/studyaids/practice/Documents/2011_mock_exam_er > rata.pdf