427174086-Depreciation-pdf PDF

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1. What is the value of an asset after 8 years of use if it depreciation from its original value of P120, 000 to its salvage value of 3% in 12 years? Answer: D. P42, 400. 2. A man bought an equipment which cost P524, 000. Freight and installation expenses cost him P31, 000. If the life of the equipm...

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1. What is the value of an asset after 8 years of use if it depreciation from its original value of P120, 000.00 to its salvage value of 3% in 12 years? Answer: D. P42, 400.00 2. A man bought an equipment which cost P524, 000.00. Freight and installation expenses cost him P31, 000.00. If the life of the equipment is 15 years with an estimated salvage value of P120, 000.00, find its book value after 8 years. Answer: A. P323, 000.00 3. An equipment costing P250, 000 has an estimated life of 15 years with a book value of P30, 000 at the end of the period. Compute the depreciation charge and its book value after 10 years using straight line method. Answer: A. d = P14, 666.67; BV = P103, 333.30 4. An equipment costing P250, 000 has an estimated life of 15 years with a book value of P30, 000 at the end of the period. Compute the depreciation charge and its book value after 10 years using sinking fund method assuming i = 8%. Answer: D. d =P8, 102.50; BV = P132, 622.60 5. An equipment costing P250, 000 has an estimated life of 15 years with a book value of P30, 000 at the end of the period. Compute the depreciation charge and its book value after 10 years using declining balance method. Answer: C. d = P9, 235.93; BV = P60, 832.80 6. An equipment costing P250, 000 has an estimated life of 15 years with a book value of P30, 000 at the end of the period. Compute the depreciation charge and its book value after 10 years using the sum of year’s digit method. Answer: D. d = P11, 000; BV = P57, 500 7. An asset costing P50, 000 has a life expectancy of 6 years and an estimated salvage value of P8, 000. Calculate the depreciation charge at the end of the fourth period using fixed-percentage method. Answer: B. P5264.00 8. A machine costing P45, 000 is estimated to have a salvage value of P4, 350 when retired at the end of 6 years. Depreciation cost is computed using a constant percentage of the declining book value. What is the annual rate of depreciation in %? Answer: B. 32.25% 9. An engineer bought an equipment for P500, 000. Other expenses including installation amounted to P30, 000. At the end of its

estimated useful life of 10 years, the salvage value will be 10% of the first cost. Using straight line method of depreciation, what is the book value after 5 years? Answer: B. P291, 500.00 10. A machine costs P8, 000.00 and an estimated life of 10 years with a salvage value of P500.00. What is its book value after 8 years using straight line method? Answer: D. P2, 000.00 11. A factory equipment has an initial cost of P200, 000.00. Its salvage value after ten years is P20, 000.00. As a percentage of the initial cost, what is the straight-line depreciation rate of the equipment? Answer: C. 9% 12. An asset is purchased for P120, 000.00. Its estimated economic life is 10 years, after which it will be sold for P12, 000.00. Find the depreciation for the first year using the sum-ofthe-year’s digit, (SOYD). Answer: D. P19, 636.00 13. An asset is purchased for P9, 000.00. Its estimated life is 10 years, after which it will be sold for P1, 000.00. Find the book value during the third year if sum-of-the-year’s digit (SOYD) depreciation is used. Answer: B. P5, 072.00 14. An asset is purchased for P500, 000.00. The salvage value in 25 years is P100, 000.00. What is the total depreciation in the first three years using straight line method? Answer: A. P48, 000.00 15. A machine has an initial cost of P50, 000.00 and a salvage value of P10, 000.00 after 10 years. What is the book value after five years using straight-line depreciation? Answer: D. P30, 000.00 16. A company purchased an asset for P10, 000.00 and plans to keep it for 20 years. If the salvage value is zero at the end of the 20th year, what is the depreciation in the third year? Use sum-ofthe-years digits depreciation. Answer: C. P857.00 17. An asset is purchased for P9, 000.00. Its estimated life is 10 years, after which it will be sold for P1, 000.00. Find the book value during the first year if sum-of-the-year’s digit (SOYD) depreciation is used. Answer: B. P7, 545.00 18. A machine having a first cost of P60, 000.00 will be retired at the end of 8 years. Depreciation

cost is computed using a constant percentage of the declining book value. What is the total cost of depreciation, in pesos, up to the time the machine is retired if the annual rate of depreciation is 28.72%? Answer: A. 56,000 19. XYZ Corporation makes it a policy that for any new equipment purchased; the annual depreciation cost should not exceed 20% of the first cost at any time with no salvage value. Determine the length of service life necessary if the depreciation used is the sum-of-the-year’s digit (SOYD) method. Answer: C. 9 years 20. Determine the capitalized cost of an equipment costing P 2M with and annual maintenance of P200, 000.00 if money is worth 20% per annum. Answer: C. P 3M 21. At 6%, find the capitalized cost of a bridge whose cost is P250M and life is 20 years, if the bridge must be partially rebuilt at a cost of P100M at the end of each 20 years. Answer: A. 245.3 22. An item is purchased for P100, 000.00. Annual costs are P18, 000.00. Using 8%, what is the capitalized cost of perpetual service? Answer: D. P325, 000.00 23. A company uses a type of truck which costs P2M, with life of 3 years and a final salvage value of P320, 000. How much could the company afford to pay for another type of truck for the same purpose, whose life is 4 years with a final salvage value of P400, 000, if money is worth 4%? Answer: C. P2, 585,964.73 24. A P100, 000, 6% bond, pays dividend semiannually and will be redeemed at 110% on July 1, 1999. Find its price if bought on July 1, 1996, to yield an investor 4%, compounded semiannually. Answer: D. P114, 481.14 25. A community wishes to purchase an existing utility valued at P500, 000 by selling 5% bonds that will mature in 30 years. The money to retire the bond will be raised by paying equal annual amounts into a sinking fund that will earn 4%. What will be the total annual cost of the bonds until they mature? Answer: D. P33, 915.05 26. A man paid P110, 000 for a P100, 000 bond that pays P4000 per year. In 20 years, the bond will

be redeemed for P105, 000. What net rate of interest will the man obtain on his investment? Answer: B. 3.47% 27. A man wants to make 14% nominal interest compounded semi-annually on a bond investment. How much should the man be willing to pay now for a 12%, P10, 000 bond that will mature in 10 years and pays interest semi-annually? Answer: C. P8, 940.50 28. It is estimated that a timber tract will yield an annual profit of P100, 000 for 6 years, at the end of which time the timber will be exhausted. The land itself will then have an anticipated value of P40, 000. If a prospective purchaser desires a return of 8% on his investment and can deposit money in a sinking fund at 4%, what is the maximum price he should pay for the tract? Answer: A. P459, 480.00 29. A mine is purchased for P1, 000,000.00 and it is anticipated that it will be exhausted at the end of 20 years. If the sinking-fund rate is 4%, what must be the annual return from the mine to realize a return of 7% on the investment? Answer: D. P103, 582 30. A syndicate wishes to purchase an oil well which, estimates indicate, will produce a net income of P2M per year for 30 years. What should the syndicate pay for the well if, out of this net income, a return of 10% of the investment is desired and a sinking fund is to be established at 3% interest to recover this investment? Answer: A. P16, 526,295 31. An investor pays P1, 100,000 for a mine which will yield a net income of P200, 000 at the end of each year for 10 years and then will become useless. He accumulates a replacement fund to recover his capital by annual investments at 4.5%. At what rate (%) does he receive interest on his investment at the end of each year? Answer: A. 10.04 32. Machine cost = $15,000; Life = 8 years; Salvage Value = $3,000. What minimum cash return would the investor demand annually from the operation of this machine if he desires interest annually at the rate of 8% on his investment and accumulates a capital replacement fund by investing annual deposits at 5%? Answer: C. $2456.66...