In forecasting PPE, which equation correctly yields Ending PPE?

In forecasting PPE, which equation correctly yields Ending PPE?

• A. Beginning PPE + Add Capex − Depreciation
• B. Beginning PPE + Depreciation − Capex
• C. Beginning PPE − Depreciation + Capex
• D. Ending PPE

Answer: (A)

PPE ending balance is determined by the flow of investments and wear over the period. Start with the PPE you had at the beginning, add the capital expenditures that add to the asset base, and subtract depreciation that reduces the asset’s carrying value. So Ending PPE = Beginning PPE + Capex − Depreciation. This ordering reflects the real-world movements: new purchases increase PPE, while depreciation lowers it as assets age. A form with the same terms but rearranged, Beginning PPE − Depreciation + Capex, conveys the exact same result because addition is commutative, but the standard way to present it is Beginning PPE + Capex − Depreciation. The option that simply states Ending PPE doesn’t show how the ending balance is derived, so it isn’t the forecasting rule.

PPE ending balance is determined by the flow of investments and wear over the period. Start with the PPE you had at the beginning, add the capital expenditures that add to the asset base, and subtract depreciation that reduces the asset’s carrying value. So Ending PPE = Beginning PPE + Capex − Depreciation. This ordering reflects the real-world movements: new purchases increase PPE, while depreciation lowers it as assets age. A form with the same terms but rearranged, Beginning PPE − Depreciation + Capex, conveys the exact same result because addition is commutative, but the standard way to present it is Beginning PPE + Capex − Depreciation. The option that simply states Ending PPE doesn’t show how the ending balance is derived, so it isn’t the forecasting rule.