Question

Net capital spending is equal to:

A. ending net fixed assets minus beginning net fixed assets plus depreciation.
B. ending total assets minus beginning total assets plus depreciation.
C. ending net fixed assets minus beginning net fixed assets minus depreciation.
D. beginning net fixed assets minus ending net fixed assets plus depreciation.

Answer 1

Net capital spending is the amount spent on fixed assets after accounting for depreciation and is calculated as ending net fixed assets minus beginning net fixed assets plus depreciation.

Step-by-step explanation:

Net capital spending is calculated to understand how much a company has spent on maintaining or increasing its fixed assets, such as property, plant, and equipment. The correct formula for net capital spending is A. ending net fixed assets minus beginning net fixed assets plus depreciation.

This calculation gives us a sense of the company's investment in its long-term assets for the period being considered. When a company buys or sells fixed assets, this changes the net fixed assets on the balance sheet, and depreciation represents the allocation of the cost of these assets over their useful lives.