Schweser notes question, Study Session 12, Equity

CFA Level II
#1

Just a warning for everyone, I am probably going to be posting a lot of questions here (probably won’t start answering peoples questions till March), and I’m fully aware that most of them will be easily figured out and I’m probably missing something obvious. But oh well, just see it as a credit to how much smarter you guys are and how muddled my mind is!

So here’s my question:

On the page 112 example:

"suppose that the company reports capital expenditures of $1,400, long-term asset sales of $600, and depreciation expense of $850. The long-term assets sold were fully depreciated. Calculate Airbrush’s revised FCInv for 2009.

Answer: 1,400-$600 = $800"

Why would depreciation expense not be added back in here? If the long term assets sold were fully depreciated, does that not imply that this is a net PP&E number? And if so, their own formula on page 111 is FCInv = ending net PP&E - beginning net PP&E + depreciation - gain on sale

#2

Depreciation is not added back because the question states that the long-term assets sold were fully depreciated.

#3

thanks Aether.

Then by “fully depreciated”, the entire asset was depreciated to the point there is no asset value left to depreciate? What’s an example of when depreciation would be added back? And why do they give us a depreciation expense of $850? What does the $850 refer to?