Kl \ Stores Corporation, headquartered in Dayton. Ohio, is one of the nation's leading consumer electronics retailers operating more than 262 stores in 37 states. The following is a note from a recent annual report:

Required: 1. Assuming that REX Stores did not sell any property, plant, and equipment in 2001, what was the amount of depreciation expense recorded in 2001? 2. Assume that REX Stores failed to record depreciation in 2001. Indicate the effect of the error (i.e..

overstated or understated) on the following ratios:

a. Earnings per share.

b. Fixed asset turnover.

c. Financial leverage.

d. Return on equity.

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(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- (e) Property and Equipment-Property and equipment is recorded at cost. Depreciation is computed using the straight-line method. Estimated useful lives are 15 to 40 years for buildings and improvements, and 3 to 12 years for fixtures and equipment. Leasehold improvements are depreciated over 10 to 12 years. The components of cost at January 31, 2001 and 2000 are as follows: 2001 2000 (in thousands) Land Buildings and improvements $ 36,866 $ 30,588 93,582 77,645 Fixtures and equipment 19,716 17,213 Leasehold improvements 11,362 10,378 161,526 135,824 Less: Accumulated depreciation (25,883) (22,023) $135,643 $113,801