Cantanna Inc, is developing a pro forma income statement for the comin

Cantanna Inc, is developing a pro forma income statement for the coming year. The chief financial officer estimates that fixed assets are $70,000,000 and that sales will be $300,000,000.

If depreciation is historically 20% of fixed assets, what is the expected amount of depreciation for the upcoming year (in dollars)?
A) $14,000,000
B) $20,000,000
C) $60,000,000
D) This figure cannot be reasonably estimated.

ANSWER

A
Explanation: A) Depreciation = .20 * (FA) = 0.0 * ($70,000,000 ) = $14,000,000.