If Gross PPE increases and there are no PPE sales, which item must the increase be classified as?

If Gross PPE increases and there are no PPE sales, which item must the increase be classified as?

• A. Depreciation
• B. Capex
• C. Impairment
• D. Debt financing

Answer: (B)

When gross PPE rises and there are no PPE disposals, the increase comes from purchases or additions to fixed assets — capital expenditures. Depreciation would not cause a rise in gross PPE; it reduces the asset base over time through a non-cash expense. Impairment would write down asset value, not increase it. Debt financing affects how you fund the asset, not the fact that the asset base has grown. So the correct classification is capital expenditures.

When gross PPE rises and there are no PPE disposals, the increase comes from purchases or additions to fixed assets — capital expenditures. Depreciation would not cause a rise in gross PPE; it reduces the asset base over time through a non-cash expense. Impairment would write down asset value, not increase it. Debt financing affects how you fund the asset, not the fact that the asset base has grown. So the correct classification is capital expenditures.