The Gap, Inc., is a global specialty retailer of casual wear, accessories, and personal products for women, men, children, and babies under the Gap, Banana Republic, Old Navy, Athleta, and Intermix brands. The Company operates approximately 3,600 stores across the globe, as well as online. The following is a note from a recent annual report:

Property and equipment are stated at cost less accumulated depreciation and consist of the following:

Required:

1. Assuming The Gap, Inc., had asset impairment write-offs of $10 million (which increased accumulated depreciation) and sold property, plant, and equipment in the most recent year with a cost of $568 million and an accumulated depreciation of $439 million, what was the amount of depreciation expense recorded in the current year?

2. Assume that The Gap, Inc., failed to record depreciation in the current year. Indicate the effect of the error (i.e., overstated, understated, or no effect) on the following ratios:

a. Earnings per share.

b. Fixed asset turnover.

c. Current ratio.

d. Return on assets.

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Current Year (S in millions) Prior Year Leasehold improvements Furniture and equipment Software Land, buildings, and building improvements Construction-in-progress Property and equipment, at cost Less: Accumulated depreciation Property and equipment, net of accumulated depreciation $3,099 2,508 1,600 1,000 222 8,429 $3,140 2,623 1,703 1,037 264 8,767 (5,962) (5,813) $2,616 $2,805