TEST I: Multiple Choice (1 point each) Ten years ago a businessman purchased a machine for P 50,000 with an expected life of 20 years based on straight line depreciation. Today, he decided to replace it with a modern one that costs P 120,000 . If the salvage value of the old unit is P 20,000 , how much more will he raise to buy the new machine? A. P 75,000 B. P 90,000 C. P 45,000 D. P 55,000 An engineer bought an equipment for P 500,000 . Other expenses including installation amounted to P 30,000 . At the end of its estimated useful life of 10 years, the salvage value will be 10% of its first cost. Using straight line method of depreciation, what is its book value after 5 ? A. P 281,500.00 B. P 291,500.00 C. P 301,500.00 D. P 271,500.00 If P500 is invested at the end of year for 6 years, at an effective annual interest rate of 7% , what is the total amount available upon the deposit of the 6th payment? A. P 3,455.00 B. P 3,544.00 C. P3,577.00 D. P3,688.00 A steel mill estimates that one of its furnaces will require maintenance of P 20,000 at the end of 2 years, P 40,000 at the end of 4 years and P 80,000 at the end of 8 years. What uniform semi-annual amounts could it set aside over the next eight years at the end of each period to meet these requirements of maintenance cost if all the funds would earn interest at the rate of 6% compounded semiannually? A. P7,897.35 B. P 9,397.35 C. P8,897.35 D. P6,897.35 How much must you invest today in order to withdraw P2,000 annually for 10 years if the interest rate is 9% ? A. P 12,853.32 B. P 12,881.37 C. P 12,385.32 D. P 12,835.32 A debt of P 10,000 with 10% interest compounded semi-annually is to be amortized by semi-annual payment over the next 5 years. The first is due in 6 months. Determine the semiannual payment. A. P 1,200 B. P 1,295 C. P 1,193 D. P1,400 A house and lot can be acquired by a down-payment of P 500,000 and a yearly payment of P 100,000 at the end of each year for a period of 10 years, starting at the end of 5 years from the date of purchase. If money is worth 14% compounded annually, what is the price of the property? A. P 810,100 B. P 808,835 C. P 801,900 D. P 805,902 A car was bought on instalment basis with a monthly instalment of P 10,000 for 60 months. If inter est is 12% compounded annually, calculate the cash price of the car. A. P 455,875.00 B. P 567,539.75 C. P 678,519.75 D. P 345,539.75 A VOM has a current selling price of P 400 . If its selling price is expected to decline at a rate of 10% per annum due to obsolescence, what will be its selling price after 5 years? A. P 213.10 B. P 249.50 C. P 236.20 D. P 200.00 Factory equipment has an initial cost of P 200,000 , its salvage value after teri years is P 20,000 . As a percentage of the initial cost, what is the straight line depreciation rate of the equipment? A. 5% B. 6% C. 9% D. 8%
Answer
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Eduardo SantosExpert · Tutor for 3 years
Answer
<p> <br />1. C<br />2. B <br />3. B<br />4. C<br />5. D<br />6. C<br />7. D<br />8. A<br />9. A<br />10. A</p>
Explanation
<p> <br />1. With this question, one is required to calculate the depreciation of machinery purchased ten years ago based on straight line depreciation which equals (cost of the machine - salvage value) / expected life of machine. Knowing the depreciated cost, then subtract it from the cost of the new machine and add salvage value.<br />2. The straight line depreciation of an installed equipment can be computed and thus determine the residual value of the equipment after half of its life span has elapsed.<br />3. This problem requires calculating compound interest to be accrued on recurring deposits made annually at given interest rate.<br />4. With this query, it is paramount to determine how to distribute a projected maintenance cost semi-annualy, factoring in a specific interest rate. Can be solved using ordinary annuity equations.<br />5. To find out the starting investment that generates annual proceeds more than the principal over years at given rate, annuities is the key factor.<br />6.To get the semiannual payment, one will use the annuity equation.<br />7. This problem involves more complex cash flow at definite years at yet another discrete period of years.<br />8. This problem involves calculating the present value of a stream of future payments when compounded annually at stipulated rate.<br />9. A diminishing value shall be required to be factorised at the rate of 10% per year over half a decade to get the value then.<br />10. The rate of depreciation of a equipment can be calculated by deducting its salvage value from the cost price and divided by the cost price then multiplied by 100% to find it in terms of percentage.</p>
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