Lechters, Inc.. and its subsidiaries is a specialty retailer of primarih brand-name basic and decorath e housewares. As of January 30. 2001. the Company operated 325 stores in 36 state- and the District of Columbia, The follow ing is a note from a recent annual report:

Required: 1. Assuming that Lechters, Inc., did not have any asset impairment write-offs and did not sell any property, plant, and equipment in the current year, what was the amount of depreciation expense recorded in the current year? 2. Assume that Lechters, Inc., failed to record depreciation in the current year. 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 are stated at cost. Depreciation and amortization are computed principally by the straight-line method by charges to earnings in amounts sufficient to write-off the cost of depreciable assets over their estimated lives, or where applicable, the terms of the respective leases, whichever is shorter.