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Calculate the 5h year depreciation charge using a fixed percentage
method of an asset costing P 1000 having a life expectancy of 5 years
and an estimated salvage value of P 400.
A. P990
C.F 80
PSEMODULE 10.2 (SOLUTION)
A machine initially worth P 50,000 depreciates in value cach year by
20% of its value at the beginning of that year. Find its book value
when it is 9 years old.
A. P 8,388.61
C.P7.782.42
B. P 5.368.71
D. P6,710.88
B.P 78
Solution
k1-
Sole-on
BV, =50,000(1 -0.2
d, Php 8045
SOk
BV, = Php 6.710.89
Alternate Solution: Mode 36
|50% (1-0.2)
Ans.D
BV96,710.89
o Phplk
400
A machine has an initial cost of P 50,000 and a salvage value of P
10.000 after 10 years. What is the straight line method depreciation
d, 4-5ý= 80.45
rate as a percentage of the initial cost?
A. 7%
C. 9%
B.88%
D. 10%
Ans.C
6.
Selutkon
FC-SV
L
A certain copier machine cost P I50,000 with a trade-in value of P
15,000 after making 800,00 copies. Using thedeclining balanced
method, what is the book value when the machine had made 300.000
copies?
S0,000-10,000
Php 4000
10
FO
d/FC 0.08 8%
Ans B
B. P62.531
BVFC(1
An
worth P
by 20% of its value at the beginning ofthat year. Comput its book
value when it is 19 years old.
A. P 850.67
C.P750.45
B. P 520.45
D. P 720.57
equipment initially
k =1BV
5,000,2.878x10
(150,000) (1-2.8782 x 10)
BVsPhp63,254.48
Aliemate Solution Mode36
50.000(1-0.2)"
BV, =Php 720.57
150,000
Alternate Solution Mode 36
800 0015,00
300,000 63,254.48
50k
Ans.D
150k(1-0.2)
BV, =19
where: k =1-
50,000 depreciates in value each year
Setote
BV, =FC(1-k
C. P 64.896
D. P 63,254
A. P 68,111
d4.000
FC 50,0X0
720.57
Determine the book value at the end of 4 years of a machine costing P
20.000 having a serviceable life of 8 years and a salvage value ofP
Ans. D
2000 atthe end of that time, Use SYD method.
see
4.
1-000.16745
d, PC(1-1)()
d, 1,000(1-0.16745) (0.16745)
Altemate Solution Calculator (Mode 36)
BV = FC(1-k)
D.P84
A. P 6800
A company bought an equipment for P 56,000. Other expen ses
including installation amounted to P4,000. The equipment is expected
B. P 7250
to have a life of 16 years with a salvage value of 10% ofthe original
cost. Determine the book value at the end of 12 years by the straight
Salut
line method.
wbere FC 20,000
DReverse Digits
Sum of the digity
BV FC-D
C. P 20,500
D. P 19,200
A. P 19,500
B. P 18,530
Seleion:
:
BV. FC-D. > where:D.
C. P 620
D. P 7000
D
C-SV)
SV
8+7+6+5
I+2+3+4+5+6+74R20,000-2,000)
D= Php 13,000
L
So
thus
BV 20,000-13,000= Php 7,000.00
12 (56k +4k)-0.1(56k+4k)
BV = (Php 56k + Php 4k)-
Ans.D
16
BV Php19,500
Alenate Solution Mode 32
0
56k+ 4k =60k
160.1(56k+4k) =6k
3.
Calculate the depreciated value after 6 years of a P 10,000 machine
having a useful lite of l10 years anda salvage value of 10 % of its
originalcost at that time. Use straight-line depreciation.
A. P 42000
C. P 4400
B. P 4500
D. P 4600
BV2 1 2 19,500
AnsA
Solution.
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D (FC-Sv)
BV PC-D,
D,10,000-0.1(10,000)] =Php 5,400
At Ist yr
BV, = FC-D.
D
Reverse D1git-(FC -SV)
Sum of the digits
(9,000-1.000)= Php 1,454.55
2
BV. = FC-D. = 10,000-5,400=Php 4,600
Altemate Solution Mode 32
Then
BV FC-D, 9,000-1,454.55
BVPhp7,545.45
Php 10k
1o(10000)0.1) = 1000
Ans.B
BV, 6=Php 4,600
Ans D
9.
where: D, =
14. An asset is purchased for P 500,000.00. The salvage value in 25 years
A company purchased an asset for P 15,000 and plans to keep it for 20
years. If the salvage value is zeo at the end of the 20th year, determine
the depreciation in the 4th year? Use SYD.
A. P 1214
C.P 1087
B. P 1157
D. P 1206
is P 100,000.00. What is the total depreciation in the first three years
using straight-line method?
A. P 48,000
B. P 32.000
C.P 24.000
D. P 16,000
Sedit
Seluken:
d.
Reverse Digl(FC SV)
D,S00,oo0-100,000)=Php 48,000
Sumof the digits
Ahemate Salution Mode 32
-(15,000-0) Php 1214.29
0 500,000
UJEFO 25100,000
Ans.A
10.
D 0 - 3 ý = 48,000
issue of 3%. 15 year bond was sold ut 95%. Whatisthe
AP1000.000
rate of interesi of this investment?
A. 5%
15. A machine costs P 8,000 and an estimated life of 10 years with a
salvagevalue of P 500. What is its book value after 8 years? Using
C.4%
D. 3%
B. 2%
Seletens
iannual net profitL000.000)(0.03) 0.03158
total investment
0.95(1.000,000
Ans.A
straight-line method.
P 2500
3.158%
B. P 2000
Ans. D
D. P 4000
D, 10 8,000-500)=Php 6.000
BV, 8.000-6,000 2,000
11. An item is purchased for P 100.000, Annual cost is P 18,000.Using
Alterntle Sotution Mode 32
8%interest rate what is the capitalized costfor perpetual service?
C.P 532,000
A. P352,000
B. P 235,000
Seletion
CcFC+
C. P 3000
D.P 325000
100,000+
8000
10 500
BV, 8Php 2.000
Php 325,000
0.08
Ans. B
Ans. D
12. A machine has an initial cost of P 50.000 and a salvage value of
10,000 after 10 years. What is the book value after 5 years using
straight-line depreciation?
A.P25,0000
C. P 35,000
D. P 30.000
B. P 15,500
Selutien
BV, = FC-D,
16. The costs of producing a commodity consist of P 45.00 per unit for
labor and material cost and P 15.00 per unit for other variable cost.
The fixed costper nonth amounts to P 450,000. If the commodity is
sokd at P 250.00 each, wbatis the break-even quantity?
A. 2345
C. 2368
B. 2632
D. 2224
where:D, 50,000-10,000)
D, = Php 20,000
BV, = 50,000-20,000= Php30,000
Alternate Solution Mode 32
2 Expenses Iocome
250x 45x
I5x +450,000
x2.368.42 units
Ans.
0 50,000
1010,000
BV, =5 = Php 30,000
17. An assel is purchased for P 9,000.00. Its estimated economic life is 10
years alter whichit will be sold forP 1,000.00. Find the depreciation
Ans. D
13. An asset is purchased for P 9,000.00. Ius 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-years' digit (SYD) depreciution is used.
A. P 8,000.00
C.P6.5(X.00
B. P 7.545.00
Seleo
D. P 6,000.00
in the first three years using sum of years digit method.
C. P 3,324.32
A. P 3,927.27
D. P 3,743.26
B. P 3,464.35
Sadeio
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Reverse Digit(FC -Sv)
D. = Sum
of thc digits
D. = 0*°(9,000-1,000)
10
,.0.08" 100,000
P 100.0001+
D, = Php 3927.27
P Php 90,614.93
Ans.A
Ans.B
18.
issue
AP1,000,000.00
of 3.5%, 15 year-bond wassold at 809%. What
is the rate of interest of this investment?
A. 3.0%
C. 2.8%
D. 3.52%
B. 4.375%6
23. A new machine was installed by a company at a total cost of P 300,000
and projected to have a useful life of 15 years. At the end of its useful
life, it is estimated to have a salvage value of P 30,000. Determine the
capitalized cost if interest is 18% compounded annually.
A. P 320,322.33
C. P 363,321.53
D. P 312,542.02
B. P 324.604.17
Selulion:
i annualnet profit (1.000.000 )(0.03)-0.04375 4.375%
total investment
0.80(1.000.000)
Soluctio
Ans. B
CC
19. An asset is purchased for P 120.000. Iis estimated life is 10 years, after
which it will be sold for P 12,000. Find the depreciation for the second
year using the sum of the years digit method.
A. P 17,342
C.P 17,673
B. P 17,632
D. P 17,505
Solitiom
Reverse Digil(FC
d
Digits
d,
=(120.000-12,000)
FC+RC-SV
Note: FC=RC
(1+ i)-1
CC 300,0004300,000-30,000
(1+0.18)-1
CC= Php 324,604.17
Ans. B
24. A company purchases an asset for P 10,000.00 and plans ta 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 of the years digits
depreciation.
d, Php 17,672.73
Ans C
A.
P 1000.00
B.
P 937.00
C. P 857.00
D. P 747.00
Selulian:
Reverse Digit(Fc-sv)
20. A factory is running at 80% efficiency with a fixed cost of P
78.000.00, variable cost per unit of P 130,00, selling price per unit of P
Digits
416.00, and production capacity of 5000 units. What is the current
profit of the factory if all products manufactured are sold.
A. P 1,066,000
C. P 1,354,400
D.P 1633,000
B. P 1,042,000
d,
10,000-0)=Php 857.14
Ans.C
25. The corporation purchased a machine for P I million. Freight and
Profit Sold- Expenses
[(416)(5000)-1 30(5000)](0.8)-78,000
=Php1,066,000
Ans. A
Od
21. A company purchases an asset for P 10,000.00 und plans to keep il for
20 years, If the salvage value is zero at the end of 20th year, what is
the depreciation in the third year? Use SYD method.
A. P 1,000.00
B. P 937.00
D. P 747.00
C.P 857.00
installation charges amounted to 3% of the purchase price. If the
machine shall be depreciaied over a period of 8
years with a salvage
value of l12 %. Determine the depreciation charged during the Sth
year using the sum of the years digit method.
A. P 101,107.11
C. P 170,I10.11
B. P 107,1 10.11
D. P 100,711.11
Sali7
d.= Reverse Digit (FC
Digits
Solilon
=
2
Reverse Digil (FC -SV)
Sv)
E(.0.000)(1.03)-(1.000.000)(1.03)(0.12)]
Digits
d,=Php 100,711.11
8
Ans. D
d, = ( P h p 10k-0) = Php 857.14
-
26. The original cost of a certain piece of equipment is P 150.000 and it is
Ans. C
22.
A
man was offered a certificate with face value of P 10,000 which
is bearing interest of 6% per year payable semi-annually and due in 6
a
years. Ifhe wants to earn 8% semi-annually, how much must he pay
the certificate?
A. 100,520.32
C. 98,434.32
B. 0,614.93
D. 96.562.52
Sedu-tiepi
depreciated by 10% sinking fund method. What is the annual
depreciation charge if the book value of the equipment after 10 years
is
the same as if it had been depreciated at P14,000.00 each year by
straight-line formula
A. P8784.36
B. P 6454.54
Sel-t
C. P 5645.57
D. P 3484.23
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30. A man buys a small garden tractor. There will be no maintenance cost
AtSLN
V
the first year as the tractor Is sold with one year's free maintenance
- D , , = 150,0K0 -14,000(1o) - Phpt0,0M
The second year the maintenance is estimated at $20. In subsequent
AtSEM
years ofthe maintenance cost will increase $20 per year (that is, 3rd
year maintenance will be S40; 4th year maintenance will be $60, and
so forth). How much would need to be set aside now at 5% interest to
pay the maintenance costs on the tractor for the first six years of
R-SV-0i)-»where SV =BV,
I50.000-10.0m=
01" -1
ownershipP
0.I
A.$101.52
B.$164.74
A Php8,784.36
A
C. $239.36
D. $284.13
Seltion
7. An engine is expected to have a maintenance cost of P1000 the first
year. It is believed that the maintenance cost will increase P 500 per
P-Ax-1)d
year. Theinterest rate is 6% compounded annually. Over a 10-year
pernod. what will be the approximate effective annual maintenance
cost?
A. P 3011.00
C. P 2450.00
B
P3452.00
P o(x-1)($20)|
+0.05)
D. P 1345.00
P-$239.36
Ans. C
Solton
A+ (x-1)d
100+(x-){S00)
Php 22.161.25
(1+0.06)
31.
A manufacturing company buys a machine for $50,000. It estimates
the machine's useful life is 20 years and that it can then be sold for
$S000. Using straight line depreciation, what is the annual
P-P--0+9)"]
depreciation charge?
22.161.25
A..S2000
C. $2500
B.$2250
D. $2750
0.06
-(0.06)|
A= Php 3,011.00
STT
Ans A
d(CsV
28. ABC Corporation makes it a policy that
for every new equipment
purchased. the annual depreciation cost should not exceed 20% of the
first cost at any time without salvage value Determinethe length of
service life if the depreciation used is the SYD method
C. 10 yrs
A9yrs
12 yrs
D. 19 yrsS
Alternate Solution
Mode 3 2
o S0.000
20 5.000
$2250
Ans. B
Seluton:
Since the st depreciation is the greatest
d
(50,000-5,000) = $2250
then
Annual depreciation =0.2 FC
32.
Company A has fixed expenses of $15,000 per year and each unit of
product hus a SO.002 yariable set. Company B has fixed expenses of
Then.
$5000 per year and can be produce the same unit of product at a S0.05
variable cost. Atwhat number of units of annual production will
Compuny A heve the same overall cost as Company B? Quantity is
Rev. digits (FC-SV) e SV =0
Digits
nearest t0
n ( n -1C)=0.2 FC
A.
CER
n=9 yTs
Ans A
100,000 units
C. 300,000 units
D. 400,000 units
200.000 units
Soltio
Epenses, 2Expenses
29. A manufacturer uses 1000 items uniformly throughout the year. The
cost to produce the items in-house is Php 2,000.00 for set-up and Php
260.00 per item. Insurance and taxes are estimated as 12% of averuge
inventory, and it costs Php 40.00 to store each unit for one complete
year. How many of these items should the manufacturer produce at a
time?
A. 135 item
C. 345 items
B. 237 items
D. 153 items
0.002x + 15.000 = 0.05x +5.000
x =
208,333.33
33.
Plan A nequires a S100,000 investment now. Plan B requires an
$80,000 investment now and an additional S40,000 invesument later.
At 8% interest, what is the breakeven point on the timing of the
additional S40,000 later?
C.7 ye
3 ycars
B. Syeaus
Sdton
200,000 units
AnsB
D. 9 yearss
PLAN A
unit of time is a year: a = 1000 iten/year
Fixed Cost: K = Php 2000.00
Inventory Cost: h y
=
40.00,(0.12)Php260.00)
Hem- yeur
120
Ans B
ilem- year
=237
00,000
Php 71.20
item-yeur
Plan A Present W = Plan B Present W
PLAN
B
From CFD
40,000
00,(00)= 80,0X)+ 40,000(1+ 0.0
n= 9,01 yrs
As.
80,000
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34.
A machine part, operating in a corrosive atmosphere, is made of low
carbon steel, costs S350 installed and lasts six years. If the part is
treated for corrosion resistance it will cost $700 installed. How long
must the treated part last to be as good an investment as the untreated
part, if money is worth 7%?|
A.
8 years
C.14 yearN
D.I7 years
B.
l1 years
38. A manufacturing fim maintains one product assembly line to produce
signal generators. Weekly demand for the generators is 35 units. The
line operates for 7 hours per day, 5 days per week. What is the
maximum production time per unit in hours required of the line to
meet the demand?
A.
C. 3 hours
hour
B. 0.75 hour
D. 2.25 hours
Sobuton
Seleken:
P-0]
7 hrs5 days
day wgek
350a07-(1.0)
A =$73.43
hr/unit
35 units
wgek
700 0.07 (0+007)
n=16.27 yrs
Ans.D
ewpsi
39. A series of year end payments extending over eight years are as
35.
An investor is considering buying
a 20-year corporate bond. The
bond has face value of
Si000
and pays 6% interestrate per yearin
two semiannual payments.
Thus the purchaser of the bond would
a
receive $30 every 6 months, and in addition he would receive S1000 at
the end of 20 years, along with the last $30
interest payment.
If the
8%
investor though he should receive
PS0,000 for the third year, and P40,000 for each year from the fourth
worth of these
through the 8th
payments if the annual interest is 8%.
year. Find the equivalent annual
A. P44,800.00
B. P30,563.00
annual interest
compounded semiannually, the amount he would be willing to pay for
the bond is closest to
A. $500
B. $600
follows: P10,000 for the first year, P20,.000 for the second year,
C. $700
D.$800
C. P35.650.00
D. P33,563.85
Se
TU FOR M10,000
20.000
40k 40k 4Dk 40k 40k
50,000
8
0.080.000)
P-1,0001
EUAC
0.08
EUAC
P=10,000(1+0.08) +20,000(1+0.08)+50,000(1+0.08)
P S802.07
400001-(1+0.08)
(1+0.08)
a.08
D
P Php 192,880
36. Consíder a deposit of P600.00 to be paid buck in one yeur by P700.00.
What are the conditions on the rate ofinterest, 1% per year
compounded annually, such that the net present worth of the
investmentis
positive. Assume i 20
A. 0sic16 7%
C. 125%si<143%
B.
0si<14 3%
D. 16.7% sis100%
Seltion
PEUA[-(+0
380A1-(1+0.08)
CEBU Ans.D
0.08
EVAC=Php33,563.85
40. A machine has been purchased and instaled at a total cost of
P18.000.00. The machine will be retired at the end of 5 years, at
which time it isexpected to have a serap value of P2,000.00 based on
curent rices. The machine will then be replaced with an exact
P F{1+i
600=700(1+i)
i = 0.1667
Then, determining EUAC
duplicate.
The company plans to establish a reserve funds to
accumulate the capital needed to replace the machine. If an average
1667%
Thus, 0% Si s16.67%
annual rate ot unflatton of 3% in anticipated, how mucbh capital must be
Ans. A
accumulated?
A PI5,030.00
C. P13,382.00
B. Pl8.548.39
D. P15,386.00
37. The cost C of a product is a function of the quantity x of the product:
C)=x-4000x+ 50. Findthequantityfor which the cost is
F P(l+f)
minimum.
3000
B. 2000
A.
Selon
C(x)=x*-4000x +50
C(x)= 2x-4000 =0
x 2000 units
Ans.
C. 000
D. 1500
where: P =18000-2000 Php 16,000
Subst. P:
F=l6,000(1+0.03)
Php 18,548.385
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41. What uniform annual amount should be deposited cach year in order to
accumulate P100,0XX0.00 at the end of the 5h annual deposit if money
-(0"] >where:P =F(1+i)
eams 10% interests?
So: F(l+1)"-1-(1+"]
C.PI8494.45
A. P15,708.83
B. P17.943.45
D. Pl6.379.75
18.000(1+0.1s) =
0.15
A
Selaien:
F[a-
1+0.15)"|
Php3,919.54
ADS. B
46. What is the present worth of the two PI00 payments at the end of the
third year and fourth year? The annual interest rate is 8%.
A
PI53
C. P162
D. P127
B. P160
100.000[0-010.10L
A = Php 16,379.75
Ans. D
Selulie
42 An asset is purchased for P1 20,000.00. Its estimated life is 10 years.
after which it will be sold for P12.000.00. Find the depreciation for
the second year using the sum-of-the-ycars-digit method:
A. P19,000
C. P18,200
B. P17.673
D. P18,400
=
PA 100
AlternateSolution:
P=100(1+0.08)+100%i+0.008)= Php152.89
100
An.A
Solelion:
d =Reverse Digit
0.08) 1008)' Php152.89
P
-SVv)
47. A manufacturer of sports equipment produces tennis rackets for which
there is a demand of 200 per month. The production set cost for each
lot of racket us P300.00. In addition, the inventory carrying cost for
Digits
-(120,000-12,000)
each racket is P24.00 peryear. Using the Economic Order Quantity
(EOQ) model, which is the best production batch size for the rackets?
C. 173 units
A. 245 units
D. 346 units
B71 units
EFOR
d. = Php 17,672.73
Ans. B
Settion
43. A fim borrows P2000 for 6 years at 8%. At the end of 6 years, it
renews the loan for the amount due plus P2000 more for 2 years at 8%.
What is the lump sum due?
C. P5,254.00
D. P6,03500
A. P6,135.00
B. P5,280.00
EOQ-2ak-2(200/month)(Php 300
h
Ans.A
= 245 units
V(Php24/year)(1yr/12months)
48. What is the maximum profit when the profit-versus-production
function is as given below? P is profit and x is unit of production.
P 200,000-x-
Seluion:
to the 8th power
From CFD:
A. 285,000
LumpSum 2,00(1+0.08)+2,000(1+0.08)
C. 250,000
D. 305,000
B. 200,000
= Php 6,034.6
Seluion
Ans D
P200.000-x1
44. The purchase of a motor for P6000 and a generator for P4000 will
allow a company to produce its own energy. The configuration can be
assembled for PS00. The service will operate for 1600 hours per year
1-(.1
dx
for 10 years. The maintenance cost is P300 per year, and costto
operate is P0.85 per hour for fuel and related cost, Using siraight line
depreciation, what is the annual cost for the operation2 There is P400
salvage value for the system at the end of 10 years.
C. P2630
A. P2710
D. P2670
B. P2480
X0.3713
At x= 0.3713
P
199,999.46» Php200,000
Ans.B
49. A man was offered a certificate with a face value of P 100,000 which
of 6%
per year payable semi-annually an due in 6 years. If
he wants to earn 8% semi-annually, how much must he pay the
is bearing
Solutier:
certilicate?
By SLM Mode 3,2
x(yr
-8)(*+1)" -0
y(Price)
0
6,000+4,000+S00
0
400
AC shift 15 2
A. P 90,615
C. P 96,322
B. P93,322
D.P 102,334
Sotuon
1010
the value of B
So, the annualcost is
EUAC=1010 300+0.85(1600) = Php 2670
Ans.D
P100.00 1+
45. In five years, P18,000 will be needed to pay lor a building renovation.
In order to generate this sum, a sinking fund consisting ofthree annual
P Php 90,614.93
payments is established now. For tax purposes, no further payments
will be made after three years. What payments are necessary if money
is worth 15% per annum?
A. P2870
C. PS100
B. P3919
D. P2670
AnA
Php 100,000
0.06
10.08
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50. A certain office cquipment has a first cost of P 20.000 and has a
Converting the mode of compounding
salvage value of P 1000 at the end of 10 years. Determine the total
010-
depreciation at the end ofthe 6th year using sinking fund method at 3%
interest
A. P 10,720
B. P11420
0.09569
C.P 12.340
D. P 10.520
From PW:
Seluton:
FC-SV-0+i-1
A
100,000 0.09569
20,0-1,00 0.03 003)"-i
12
A= Php 839.2
A = Pbp1657.38
At 6th yr
Ans. D
D. 1+i-i- 0.03 +003-1=Php10,720.61
Ans.A
54. A local firm is establishing a sinking fund for the purpose of
be redeemed
at 110% on June 21, 2004. It is bought on June 21, 2001 to yield 4%
S1. AP 1000, 6% bond pays dividend semi-annualy and will
accumulating a sufficient capital to retire its outstanding bonds at
maturity. The bonds are redeemable in 10 years, and their maturity
value is P150.000.00. How much should be deposited each year ifthe
interest. Find the price of the bond.
A. 1,144.81
C. 1,432.332
B. 1,129.42
D.1,042.12
fund pays interest at the rate of 3%?
Selufion
Selu-tion
EFOR150.0F-0-.009)"-
(0.06
1000
0.04
2
2
D.P16,848.87
B. P13,084.58
P-0]Ri
P.
150,000
C.P14.094.85
A. P12,547.14
A=Php 13084.58
(100-(0.1000)12
B
P= Php 1,144.81
Ans.A
52. You need P4000 per year for four years to go to college. Your father
invested PSO00 in 7% account for your education when you were born.
with
P4000 at the end of your 17, , 19th and 20
birthday, how much money will be left in the account at the end of the
Ifyou
draw
18
21 year?
A. P2500
B. P3400
Saladan
C. P1700
D. P4000A
55. A machine cast P20,000.00 today and has an estimated scrap value of
P2,000.00 after 8 yeurs. Inflation is 8% per year is 8%. How much
money needs to be set aside each year to replace theFQE machine with
an identical model 8 years from now?
A. P2,990.00
C.P3,920.00
B. P3,290.00
D.P3,610.00
2000
Solet
1
4000
2
2
3
2p2
20,000
CEBU 20,000-2,000(1+0.08) A1-(1+0.08)
0.08
A=Php 3292.27
Ans. B
FromCFD, At21
so(1007-
+0.0n)-1(007=
Then,
At 21, x = Php 1700
Ans. C
53. Mr. Ayala borrows PI00.000.00 at 10% effective annaual interest. He
must pay back the loan over 30 years with uniform monthly payments
due on the first day of each monh. What does Mr. Ayala pay each
month?
A. P870.00
C. P878.00
B. P846.00
D. P839.00
Setukon
S6. A machine is under consideration for investment. The cost of the
machine is P25,000.00. Each year it operates, the machine will
generate a savings of P15,000.00. Given an effective annual interest
is
payback period, in years, on the
rate of
investment in the machine?
18%. whut the discounted
A.1.75 years
C.L.67 ycars
B. 3.17 years
D.2.16 years
P-0"]
25,000
1-(1+0.18)"
0.18
n=2.155yTs
Ans.D
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57. A businessman wishes to earn 7% on his capital after payment of
taxes. If the income from an available investment will be taxed at an
average rate of 42%, what minimum rate of retum, before payment of
taxes, must the investment offer to be justified?
A. 12.1%
C.11.1%
D.12.7%
B. 10.7%
Selti.
Since the Ist depreciation is the greatest then.
d
Annual depreciation = 0.2 FC
Then
Rev. digilS(FC-SV) @SV =0
2 Digits
n
nn+1C)=0.2
FC
Let x >invested
0.07x =(1-042)x i
2
i =0.121 » 12.1%
n=9 yrs
Ans. A
58.
Ans. A
The
maintenance cost for sewing machine this year is expected to be
P S00. The cost will increase P S0 each year for the subsequent 9
a
years. The interest is 8 % compounded annually. Whatis the
approximate present worth of maintenance for the machine over the
full 10-year period?
. P4.700
C.P 5,30%0
B. P 4,300
D. P5,500.
Selutien:
62. A deposit of P1000 is made in a bank account that pays 8% interest
compounded annually. Approximately how much money will be in
the account after 10 years?
A.P2,160
(1+i)
D. PL925
Selution
F P(1+i=1000(1+0.08)
F
P-Ar1)a]
C. PI860
B.P2.345
Php 2158.92
Ans.A
500+50(x-1)
63. A machine costing P 480,000 has a life expectancy of 12 years with a
salvage value of 10% of the first cost. What is the book value after five
10.08)
P Php 4.653.88
years using the declining balance method?
Ans. A
B. P 174,322
A. P 183,892
59. A machine costing P 45,000 is estimated to have a book value of P
4,350 when retired at the end of 6 years. Depreciation cost is computed
using a constant percentage ofthe declining book value. What is the
annual rate of depreciation in %?
A. 33.25%
B. 35.25%
Saleion
BV FC-D, =FC(1-k
where
C. 32.25%
D. 34.25%
0.10FC
0.1746
FC
BV, 480,000(1-0.1746) = Php183,896.97
Setution
k
C. P 152,758
D. P 166,342
Ans. A
43500.3225
45000
l
64. A macinehas an initial cost of P 50,000 and a salvage value of
P10,000.00 after 10 years. What is the book value after 5 years using
Aternate Sohrion: Mode 3 6
straight line depreciation?
A P 35,000.00
0 45,000
6 4350
B. P 15.500.00
ACShift 1 5 2 .67745
the value of B
k=l-B 0.3225
D. P 30,000.00
Setution
CE
Ans. C
esks
60. An equipment costs P 10,000 with a salvage value of P 500 at the end
BV, = FC -D,
where: D
50,000-10,000) Php 20,000
BV, S0.000-20,000 = Php 30,000
of 10 years. Calculate the annual depreciation cost by sinking fund
method at4 % interes
A. P 791.26
C. P 950.00
D. P 845.332
B. P 971.12
Aluetnate Solutso Mode 32
Selution:
BV, 5 Php 30.000
C-SVui)-]
10,.000-500
+0.04)-
A Php 791.26
Ans. A
61. Acompany 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 SYD method
A. 9 years
C. 10 years
B. 12 years
D. 19 years
Solutomi
C.P 25,000.00
x
oso,000
1o10.000
Ans. D
65. A producthas a current selling price of P 325. If its selling price is
expected to decline at the rate of 10% per annum because of
absolescence, what will be its selling price four years hence?
A. P 213.23
C. P 210.21
D. P 209.54
B.P221.42
Seleiems
BV, = FC(1-k)
Ans.A
BV, = 325(1-0.1)' = Php 213.2325
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A machine costing P 480,O00 has a life expectancy of 12 years with a
salvage vaBlue of 10% of the first cost. What is the book value after ive
years using the decining balance method?
C.P152,7S8
A. P 183,892
D.P 214,785
B.P196432
70.
For some interest rate i and some number of interest perids n, the
unilorm series capital recovery factor is 0.0854 and the sinking fund
factor is 0.0404. The interest rate i must be
C. 6%
A. 3 4%
B. 4 4%
D. 8%
Soletion
Selulior
=
BV. = RC(1-A)
BV, = C - D.
USCRF-SFF
=0.0854-0.0404
where
i=0.0450
O.10FC -0.1746
Ans. B
BV, = 4$0,000(1-0.1746) = Php183.,896.97
71. A man buys a small garden tractor. There will be no maintenance cost
the first year as the tractor is sold with one year's free maintenance
The second year the maintenance is estimated at $20. In subsequent
AnsA
67. The fist cost of equipment is P 100,000 and estimated to have a book
value of P 30,000 when retired at the end of 10 years. Detemine the
annual rate of deprecation using a constant percentage declining
balanced method.
A. I1.34%
C. 10.33%
B. 10.21%
D. 10.56%
Sola~ien:
years the maintenance cost will increase $20 per year (that is, 3d year
maintenance will be S40; 4th year maintenance will be S60, and so
forth). How much would need to be set aside now at 5% interest to pay
the maintenance costs on the tractor for the first six years of
ownership?
C. $239.36
A. $101.52
B. $164.74
D. $284.13
Seloi
eni
30.000-0.1134
kl-100.000
P-A-
Alternate Solution Mode 36
0 100.000
P-0(-520)
10 30.000
+0.05
P $239.36
k = 1-B =0.1134
Ans. A
AnsC
68. A company bought an equipment for P56.000. Otherexpenses
including installation amounted to P 4,000. The equipment is expected
to have a life of 16 years with a salvage value of 10% of the original
cost. Detenmine the book value at the end of 12 years by sinking fünd
method at 12% interest.
A. P 28,500
C.P28,500
B. P 27,530
72. A manufacturing company buys a machine for S50,000. It estimates
the machine's useful life is 20 years and that it can be sold for $5000.
Using straight line depreciation. what is the annual depreciation
charge?
C. $2500
A.$2000
B. $2250
D.$2750
D.P29,520
Sduteni
d(FC-Sv)=50.000-5,00)
BVFC Dn
Determining annual dep.
d $2250
FC-SV fa+i"-1
AlternateSalation-
(Php56k+ 4k)-(0.10)(Php 56k + 4k)
20126
CEBU 0 50,000
20 5.000
A = Pbp 1263.06
B $2250
BV12-C-DPi2
BV2 Php(5ok 4k)
00.12)|
BV2 Php 29,518.38
Ans D
69. The maintenance cost of a machine this year is expected to be P 1000.
The cost will increase P200 each year for the subsequent 9 years. The
interest is 15% compounded annually. What is the approximate present
worth of maintenance for the machine over the ful 10 years?
C. P8,414.67
A. P 4,818.67
D. P4,418.76
B. P 4,481.76
13. Company A has fixed expenses of SI5.000 per year and each unit of
product has a $0.002 variable cost. Company B has fixed expenses of
$5000 per year and can produce the same unit of product at a $0.05
variable cast. At what number of units of annual production will
Company A have the same overall cost as Company B? Quanity is
nearest to
A. 100,000 units
B. 200,000 units
C. 300,000 units
D. 400,000 units
Sealian
2Expenses, - Expenses
Slo
P-A(a1)a
P-21iy
1000 200(x -1)
(1+0.15)
P Php 8414.66
As C
Mode 32
0.002x+ 15,000) =0.05x + 5,000
x 208,333.33 units
As.
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74. Plan A requires a Php5,000,000 investment now.
78. A bank charges 1 h per month on the unpaid balance for purchases
Plan B requires an Php 4,000,000 investment now and an additional Php
2.000,000 investment later. At 8% interest, what is thhe breakeven point
on the timing of the additional $40,000 later?
A. 3 years
C. 7 years
B. 5 years
D.9 ycaN
made with its credit card. This is equivalent to what effective annual
interest rate?
A. 1.5%
C. 18%
D. 19.5%
B. 12%
Seltlon
Seleton
i,(1+-1
PLAN A
i,= (1+0.015)"-1
i, 0.19562 = 19.562%
Ans.D
5,000,000
79. A man purchased a car with a cash price of P350,000. He was able to
Plan A Present W = Plan B Present W
negotiate with the selker to allow him to pay only a down payment of
20% and the balance payable in equal 48 end of the month installment
at 1.5% interest per month. On the day he paid the 20h installment. he
5,000.000= 4,000,000+ 2,000,000 (1+0.08)
PAN B
n 9.01 yTs
decided to pay theremaining balance. How much is the monthly
Ans. D
2,000,000
payment and what is the remaining balance that he paid?
C. P186034.30
A. P187030.20
B. P186927.25
4,000,000
75. A newbuildingis being considered to housesome equipment. The
new buiding will reduce maintenance costs by S00 per year for the
first ten years, and $3000 per year thereafter. Based on a 50-year
D. P 195986.26
Seltion
From CFD
analysis period, what buiking construction cost can be justified? The
P
justified construction costis closest to if the interest is 9.5%
250.000=(3so.0o0)(0.2)+ 0.015 -(+0015)
A. $30.000
B. $50.000
C. S90,000
D. $140,000
214
AT6000
3.000r,
0 . 0 9 5 L ( + 0 . 0 9 5 )
ao
0.095 1-+0.095) 10.095)
P S50.071.52
Ans
money have to be invested before it wil double in value?
A. 59 months
C. 70 months
D. 76 months
B. 62 months
F P(1+i)
2P P(1+i
2P=P(+0.0i)
n 69.66 months
Alternate Solution: ( Rule of 72
72 rule
months
77. A department store charges one and one-half percent interest per
month on credit purchases. This is equiyalent to a nominal annual
interest rate of
A. 1.5 percent
C. 18.0
D. 19.6
I5.0
Selu-kon:
.i.m
i, =(0.015)(12)
=0.18 a 18%
D. 199,008.23
Salidon
F[0-
4.000,00=
0.15)-
A=Php 197.008.25
81. An oil well which could produce a net income of P5,000,000.00 per
year for 25 years is being considered to be purchased by group of
businessmen. If the returm on investment is targeted to be 20% out of
the netincome and asinking fund at 18% interest is to be established
to recover the investment, how much must be paid to the oil well?
A. P73,921,184.58
B. P72.867,170.54
C. P73,985,239.55
D. P67,895.179.70
70 months
Ans.C
Ans.C
80. In anticipation of a much bigger volume of business after 10 years, a
fabrication company purchased an adjacent lot for its expansion
program where it hopes to put up a building projected to cost
P4.000,000.00 when it will be constructed 10 years after. To provide
for the reguired capita expense,it plans to put up-a sinking fund for the
purpose. How much must the company deposit each year if interest to
be eamed is computed at 15%?
C. 197,008.25
A. P198,009.30
CEBUAns.C
Sellon
(0.015)-1
FPhp186921.24
Ans. B
B. P197,007.45
76. How many months at an interest rate of l percent per month does
,
APhp 8225
Balance350.000(1-0.2)(1+0015
Sdton
12
DP+Annual payments
Solfiom
15,000,000
0.18
1+-I (1+0.18)-1
As.A
= Php 73,921,184.58
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82
A unit of welding machine cost P45,00X with an estimated life of 5
years. Its salvage value is P2,500 find its deprecation using
Straight line method
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86. A steel drum manufacturer incurs a yearly fixed operating cost of
$200,000. Each drum manufactured costs Si60 to produce and selk for
$200 What is the manufacture's break-even sales volume in drums per
Assuming that n will deposit the money to a bank giving 8.5%. Solve
year?
100X)
C. 1250
B. 25(X)
D. 5000
A.
for the deprviation.
A. P8700: P7692.50
B. P8500: P6494.55
C. P8500 P7172.54
Sele
Break even
D. P7834 P6794,45
2
Income =2Expenses
Using SLM
200x 160x + 200,000
C-SV_45.000-25000 -Php 8500
Mode:
x5000units
Ans.D
32
0 45.000
87.
5 2.500
five
B-Php 8500
By Sinking Fund
order to meet demand'
A. 0.75 hour
B. 2.25 hours
FC-SV 01+i"-1
45,000-2500=0.085 (+0.08s)-I
week. What is
C. I hour
D. 5 hours
Solufiom
A = Php 7172.54
Ans. C
83
A manufacturing firm maintains one product assembly line to produce
signal generators. Weekly demand for the generators is 35 units, and
the line operates for seven hours per day.
days per
the maximum production time per unit, in hours, required of the line in
7 hrs5 days
day wgek ,
If you obtain a loan of PIM at the rate of 12%
in order to build a house, how much umust you pay monthlyto amornize
the loan within a period of ten years?
A. P14.980.60
C. P14,974.50
B. P13.785.56
D. P13,994.64
compoundedannualy
1
s units
wek
hr/unit
Ans. C
88. Tops Corporation's gross margin is 45% of sales. Operating expenses
such as sales and administration are 15% of sales. Tops is in a 40% tax
bracket. What percent of sales is their profit after taxes?
Changing the mode of compounding
0%
C. 5%
B.18%
D. 24%
o12-
Sales=(1-0.4)(0.45-0. 15)
0.11386
0.18
P
18%
Ans. E
89
1.000,0)= 0.11386
12
A = Php13,994.72
Ans.D
A company purchased for a cash price of P500,000.00 a machine
which is esuunated to have a salvage value of PS0,000.00 at the end of
its 10 yeat ecunomie life. How much yearly deposit must the company
deposit un a siæking fund hat will pay l18% interest, compounded
yearly, to accumulate the needed fund to purchase a new machine at
the end of the 10th year economic life of the machine it purchased if a
new machine will cost 75% mmore by that time.
84.
A bank pays one percent interest on savings accounts four times a
year. The effective annual interest rale is
C. 3.96%
A. 1.00%
D. 4.06%
B. 1.04%
A. P35,078.60
C. P35,085.64
B. P40,080.67
D. P35,074.58
Sale.kon
3y SEM
ola-bon
= (1+0.01)
-1
-sV-
=
0.0460
= 4.6%
"-
(500.000)(75)-50,000 = 0.18 +0.1s)" -
Ans. D
A =Php 35,074.58
85. Whal interest rate, compounded quaterly, is equivalent to a 9.31%
effecive interest rate?
A. 2.25%
C. 4.66%
B. 2.33%
D. 9.00%
Ans. D
0.
A car dealer acdvertise the sale of a car model for a cash price of
P280,000.00. Ii purchased on installment, the required down pay ment
is 15% and balunce payable in 18 cqual monthly installnents at an
nterest rate of 1.5% per month. How much will be the required
-1
0om-(O.0XX)
AnsD
= 9%
nonthly payuwents?
A.PI5,186.70
C.PI5,185.78
B. PI5,200.87
D. Pl6,187.75
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Selelion:
The service has an infinite life, capitalized cost:
Sdton
CapCost (Brand B) =initial Cost
Car price = DP + Anual payments
A
3.500+0, 000(1-0.87)= Php 29.500.00
280,000 0.15(280,.000)+ o.015 1-(1+0.015)"
0.10
A = Php 15,185.78
Ans.C
AnsC
91. A small building can be reroofed for Php 30,000 (aluminum) or Php
96. The heat loss from bare steam pipes costs a hotel manager Pbp 20,000
annually. Two brands of insulation are available. Brand A will cost Php
6,000 and will reduce o8ses by 93%. Brand B wil cost Php 3500 and wil
175,000 (shingles). The estimated lives are 50 years and 15 years
respectively. If the interest rate is 10%, what is the cquivalent uniform
annual cost for aluminum?
A. Php 30,258.00
C. Php 35,098.00
D. Php 20,675.00
B. Php 23,0O8.00
reduce losses by 87%. Which insulation is economically superior if the
interest rate is 10% ?
A. Brand A
C. both are superior
D. insufficient data for comparison
B. Brand B
Selelen
The service has an infinite life, capitalized cost
EUAC 1 0 " - 1
300,000
Cap Cost (Brand A)= 6,000
O.100.10)"
EUAC =Php 30,258aluminum
20,000(1-0.93) Php 20,000.00
0.10
Cap Cost (Brand B) =3,500+
Ans.A
=
Php 29.500.00
10
Brand A is superior for it needs lesser Cap Cost
92.
be reroofed for
A
smallbuilding can
175.00
(shingles). The estimated lives are 50 yearsand15years,
respectively. If the interest rate is 10%. what isthe equivalent unifom
annual cost for shingles?
A. Php 30,258.00
Php 30,000 (aluminum) or Php
97 The total estimated costs of producing 240 and 360 units are Php
cost?
is
4000 respectively.
C. Php 7.50 unit
A. Php 5.00/unit
D. Php 10.00/unit
B. Php 7.00/unit
34000and Php
C.Php 35.098.00
D. Php 20.675.00
B. Php 23,008.00
Ans. A
What the incremental
Seluton
A110
incremental cost= 4000-34O0600
120
=175,000
360-240
L 01 0 1 . 1 0 5 I 5 , 0 0 0
Php 5.00/ unit
Ans. A
EUAC Php 23,008shingles
Ans. B
98. The totalestimated costs of producing 240 and 360 units are Php 3400
and Php 4000respectively. Whatis the is the fixed cost?
93. An item is purchased for Php 5,000,000. Amualcosts are Php
900,000. Using 8%, what is the capitalized costof perpetual service?
A. Php 14.71/unit
B. Php 12.345.000.00
C. Php 2,200.00 /unit
D. Php 4.500.00 /unit
B. Php 5.00/ unit
C Php 12,645,000.00
A. Php 16, 250,000.00
D. Php 1.450,000.00
Selotian
incremental cost
The service has an infinite life; capitalized cost:
Fited Cost=Php 3400 (Php 5.00/unit 240 units)= Php P 2,200
Cap Cost (Brand A)= initial Cost +
5,000.00+
4000-3400 Php 5.00/umit
360-240 120
n6RPhp16.250,000
CEBU
Ans.C
99. A production onder for200 units is received. The item is made on a
Ans.A
94. The heat loss from bare stean pipes costs a hotel manager Php 20.000
annually. Two brands of insulationare avaitable. Brand A will cost Php
6,000 and will reduce losses by 93%. Brand B will cost Php 3500 and will
reduce losses by 87%. What ure the capitalized conts of perpetual service
for brand A if the interest rate is 10% 7
A. Pbp 16.000.00
C. Php 30,000.00
B. Php 20,000.00
D. Php 42,000.00
machine that has a Php 1,000.00 set-up., an output of six items per
hour, and a daily fixed cost of Php 5000. The variable item cost is
$1.00. What is the highest price the company could afford to buy the
item for, instead of producingthe item itself?
A. Php 186.78
c. Php 183.50
B. Php 159.25
D. Php 120.50
Working hours in a day is assumed to be 8 hours.
Stion:
The service has an infinite life; capitalized cos
Cap Cost initial Cost
= 6,000+
200units
time requreu (6nit l hrX&hrs/ day) 4,17 dayss
+ A
Cost per em= piN0+4.17(Php5000)+ 200(Php50)
20,000(1-095)Php 20,001K)
0.10
200
Php 159.25
Ans. B
Ans. B
95. The
from bare steam pipes costs
manager Php
annually. Two brands of insulation ure avaikable. BrandA will cost Php
heal loss
a hotel
20,000
6,000 and will reduce losses by 93%. Brand B will cost Php 3500 and will
reduce losses by 87%. What are thecapitalized costs of perpetual service
for brand B if the interest rate is 10% 7
A. Php 16,0KO.00
C. Pbp 29,.500.0K)
B. Php 20,000.00
D. Plhp 42,000.00
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100. A public works project has an initial cost of Php 1.000,000 benefits
with a present worth of Php 1.500,000 and disbenefits with a present
worth of Php 300,000. What is the benefits cost ratio and the excess of
benefits over costs?
A. 2.0 and Php 5,000,000.00
C. 1.7 and Php 300,000.00
B. 1.2 and Php 1,000,000.00
D. 1.2 and Php 200,000.00
Seloten:
B1SO0,000-300,000 = 1.2
c
1.000,000
B-C Phpl,500,000-Php300,000-Phpl,000,0 = Php200.000.00
Ans. D
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