SITUATION 1: An electronic balance costs P90, 000 and has an estimated salvage value of
P8, 000 at theend of its 10 years life time. Use the straight-line method.
1.
What is the depreciation in three years?
2.
What is the book value in three years?
SITUATION 2: A tax- a n d d u t y - f r e e importation of a 30HP sand mill (for paint
manufacturing) costP360, 000, CIF Manila Bank charges brokerage cost P5, 000. Foundation
and installation costs were P25,000. Other incidental expenses amounted to P20, 000.
Salvage value of the mill is estimated to be P60,000 after 20 years.
3. Find the appraisal value of the mill, using straight line depreciation, at the end of
10 years.
4. Find the appraisal value of the mill, using straight line depreciation, at the end of
15 years.
5. A certain company makes it the policy that for any new piece of equipment the
annual depreciation cost should not exceed 10% of the original cost at any time with
no salvage or scrap value. Determine the length of service life necessary if the
depreciation method used is straight line formula
SITUATION 3: A broadcasting corporation purchased equipment worth P53, 000 and paid P1,
500 for freight and delivery charges to the site. The equipment has a normal life of ten years with
a trade-in value of P5, 000 against the purchase of new equipment at the end of life. The interest
is 6%.
6. What is the annual depreciation cost?
7. What is the total depreciation cost in 7 years?
8. What is the book value in 7 years?
SITUATION 4: Determine the rate of depreciation, the total depreciation up to the end of the
8th yearand the book value at the end of 8 years for an asset that costs P15, 000 new and has
an estimated scrap value of P2, 000 at the end of 10 years by:
9. Using the declining balance method.
10. Using the double declining balance method.
A. PRESENT ECONOMY
1. The monthly demand for ice cans being manufactured by Mr. Cruz is 3,200 pieces. With a
manually operated guillotine, the cutting cost is P25.00. An electrically operated hydraulic
guillotine was offered to Mr. Cruz at a price of P275, 000 and which will cut by 30% the unit
cutting cost. Disregarding the cost of money, how many months will Mr. Cruz be able to
recover the cost of the machine if he decides to buy now?
2.
A company manufactures 1,000,000 units of a product yearly. A new design of the
product will reduce materials cost by 12%, but will increase processing cost by 2%. If
materials cost is P1.20 per unit and processing will cost P0.40 per unit, how much can the
company afford to pay for the preparation of the new design and making changes in
equipment?
3.
a)
b)
Two workers, A and B, each produce 200 pieces of a product per hour. Because of defects,
2%of the pieces produced by b are rejected. These defective pieces are repaired at a unit
cost of p 0.60per piece. The cost of materials per piece is p2.50
If each worker is paid p20.00 per hour, determine the cost per acceptable piece.
How much should A receive per hour in order that his cost per acceptable piece will equal
that of B?