1. What is the MOST nearly effective annual interest
rate on a loan if the nominal interest rate is 9% per
year compounded quarterly?
2. Find the amount of P30,000 at 6% simple interest
after 5 years.
3. A bank is advertising 9.5 percent account that yield
9.84 percent annually. Find how often interest is
compounded.
4. My Johnson borrows $ 100,000 at 10% effective
annual interest. He must pay back the loam over 30
years with uniform monthly payments due on the first
day of each month. What does Mr. Johnson pay each
month?
5. The rate of return for a ₱10,000 investment that will
yield ₱ 1,000 per year for 20 years is closest to?
6. A price tag of ₱1,200 is payable in 60 days but if
paid within 30 days it will have a 3 percent discount.
Find the rate of interest.
7. How long in nearest years will it take money to
quadruple if it earns 7% compounded semi-annually?
8. An asset is purchased for P 120,000,00. Its estimated
life is 10 years, after which it will be sold for P
12,000,00. Find the depreciation for the second year
using SOYD method.
9. A student will receive P 3,000 at the beginning of
each 3 months for 4 years. What is the sum of this
annuity of the end of the 4th year if the interest rate is
6% compounded quarterly?
10. A equipment cost P10,000 with a salvage value of
P500 at the end of 10 years. Calculate the annual
depreciation cost by sinking fund method at 4%
interest.
11. A man paid a 10% down payment of P2,000,000 for
a house and lot and agreed to pay the balance on
monthly installments for 5 years at an interests rate of
15% compounded monthly. What is the monthly
installment in pesos?
12. In how many years will P100 000earned as
compound interest of P50 000 if the interest rate is
9% compounded quarterly?
13. A farmer selling eggs 50 pesos a dozen gain 20%. If
he sell the eggs at the same price after the cost of the
eggs by 12.5%. How much his new gain in percent?
14. A loan of P5000 is made for a period of 15 months,
at a simple interest of 15%, what future amount is
due at the end of the loan period?
15. Mr. Bacani borrowed money from the bank. He
received from the bank P1842 and promise to repay
P2000 at the end of 10mos, determine the rate of
simple interest.
16. What rate of interest compound annually is the same
as the rate of interest of 8% compounded quarterly?
17. An amount of P1000 becomes P1608.44 after 4years
compounded bimonthly. Find the nominal rate.
18. How long will it take money to double itself if
invested at 5% compounded annually?
19. What annuity is required over 12 years to equate with
a future amount of P20, 000? Assume i = 6%
annually
20. How much should you put into a 7.9% savings
account in order to have $175,000 in 63 years?
21. An investment of $350,000 is made to be allowed by
payments of $200,000 each year for three years.
What is the annual rate of return on investment for
this payment?
22. The president of an engineering firm wishes to give
each of his 50 employees a holiday bonus of
P10,000. How much should he invest monthly for a
year at 12 percent nominal interest rate to be able to
give that bonus?
23. Accumulate P6,000 at the end of 12 years at an
interest rate of 10 percent.
24. You deposit $1000 into a 9 percent account today. At
the end of two years, you will deposit another $3000.
In five years you plan a $4000 purchase. How much
is left in the account one year after the purchase?
25. If you borrow money from your friend with, simple
interest of 12 percent, find the present worth of
P20,000 which is due at the end of nine months
26. You need P40,000 per year for four years to go to
college. Your father invested P50,000 in a 7 period
account for your education when you were born. If
you withdraw the P40,000 at the end of your
17th,18th,19th , and 20th years, how much money
will be left in the account at the end of your
21styear?
27. A loan of P4,000 is made for a period of 16 months
at a simple discount rate of 7 percent, what future
amount is due at the end of the loan period?
28. The interest rate of return of a project that involves
an initial investment with subsequent positive cash
flows is 18 percent. Four companies considering the
project. Given the following respective minimum
attractive rates of return (MARR), which company
will be most likely to accept the project?
29. What is the amount of P12,800 in 4 years at 5 percent
compounded quarterly?
30. A man borrowed P2,000 from a bank and promised
to pay the amount for one year. He received only the
amount of P1,920 after the bank collected an advance
interest of P80.00. What is the rate of discount?
31. Dalisay Corporation’s gross margin is 45 percent of
sales. Operating expenses such as sales and
administrations are 15 percent of sales. Dalisay is in
40 percent tax bracket. What percent of sales is their
profit after taxes?
32. A car dealer advertises the sale of a car model for a
cash price of P280,000. If purchased on installment
the regular down payment of 15 percent and balance
payable in 15 equal monthly installments at an
interest rate of 1.5 percent per month. How much will
be required monthly payments?
33. A machine is under consideration for investment. The
cost of machine is P25,000. Each of year it operates,
the machine will generate a saving of P15,000. Given
an effective annual interest of 18%, what is the
discount payback period, in year, on the investment
of the machine?
34. What interest rate compounded monthly in equivalent
to an invest rate of 9% compounded quarterly?
35. A bike worth P10, 000 is discounted now at 10%.
Four months later and bike is sold with 15%
discount. How much the bike sold?
36. Find the value P100 at the end of 2years at an interest
rate of 8% compounded quarterly.
37. A company deposits P1, 000,000 every year for ten
years in a bank. The company makes no deposits
during subsequent five years. If the bank pays 8
percent interest, the amount in the account at the end
of 15 years is nearest to?
38. What present sum would need to be put in savings
account now to provide P10, 000 annual withdrawals
for the next 50 years, if interest is 6 percent?
39. What is the effective annual interest rate on a loan if
the nominal interest rate is 12 percent per
compounded quarterly?
40. Find the equivalent annual rate of interest of 8%
compounded quarterly.
41. A price tag of P1450 is paid in 70 days, but if paid
within 35 days it will have a 5 percent discount.
What is the rate of interest?
42. A manufacturing company buys a machine for
P500,000. It estimates the machine’s useful life is 20
years and that it can be sold for P50,000. Using
straight line depreciation, what is the annual
depreciation charge?
43. A piece of property is purchased for P100,000 and
yields P10,000 yearly profit. If the property is sold
after five years, what is the minimum price to breakeven, with interest at 6 percent?
44. A machine an initial cost of P 50,000.00 and a
salvage value of P 10,000.00 after 10 years. What is
the book value after 5 years using straight line
depreciation?
45. When will an amount be tripled with an interest of
11.56%?
46. The maintenance costs associated with a machine are
$2,000 per year for the first ten years, and $1,000 per
year thereafter. The machine has an infinite life. If
interest is 10%, what is the present worth of the
annual disbursements?
47. An employee obtained a load of P10,000 at a rate of
6% compounded annually in order to build a house.
How much must he pay monthly to amortize the loan
within a period of 10 years?
48. A man loans P187,400 from the bank with interest at
5% compounded annually. He agrees to pay his
obligations by paying 8 equal annual payments, the
first being due at the end of 10 years. Find the annual
payments.
49. In 1906 an original painting of Picasso has a market
price of $ 600.00 and in1995 its price has increased
to $ 29,000,000.00. What is the rate of interest of the
painting?
50. A piece of machinery costs $ 20,000 and has an
estimated life of eight years and a scrap value of $
2,000. What uniform annual amount must be set
aside at the end of each of the eight years for
replacement if the interest rate is 4%?
51. A drill press is purchased for $ 10,000 and has
estimated life of twelve years. The salvage value at
the end of twelve years is estimated to be $ 1,300.
Using general straight-line depreciation, compute the
book value of the drill press at the end of eight years.
52. An engineer buys a machine costing P 500,000.
Compute the capitalized cost if the machine has a life
of 5 years and a salvage value of P 80,000. Rate of
interest is 12% per annum.
53. A man pays P 15,000 annually starting at the end of
the 5th year until at the end of the 10th year, P 20,000
annually at the end of the 11th year until at the end of
the 15th year, and P 35,000 annually for the
succeeding 5 years. With 10% interest, what annuity
should he pay for 20 years to settle that amount
equally?
54. On his 6. birthday a boy is left an inheritance. The
inheritance will be paid in a lump sur of $10,000 on
his 21", birthday. What is the present worth of the
inheritance as of the boy's Birthday, if interest is
compounded annually at 4%?
55. Suppose a man receives an initial annual salary of
P60,000 increasing at the rate of P5,000 a year. If
money is worth at 10%. Determine his equivalent
uniform salary for a period of 8 yrs.
56. It is a type of annuity where the first payment does
not begin until some later date in the cash flow
57. A factory operator brought a diesel generator set for
P 10,000.00 and agreed to pay the dealer uniform
sum at the end of each years for 5-yrs at 8% Interest
compounded annually for P150.00, that the final
payment will cancel the debt for principal arid
Interest. What is the annual payment?
58. The original cost of equipment is P150,000 and is
depreciated by 10% sinking fund method. What is the
annual depreciation charge if the book value after 10
year's is the same as it had been depreciated at
P14,000 each year by straight line formula?
59. Randy and Edward worked on identical machines
and each produces 200 pieces per hour. Some of the
pieces they produce are defective, but these pieces
can be repaired at a cost of P1.50 per piece. On the
average, Randy makes 10% defective, pieces and
Edward makes 6% the same. If Randy is paid P 9.00
per hour and Edvard at P 11.00 per hour, determine
the average cost per piece for each worker
considering only the cost of defective pieces and their
wages
60. A machine is under consideration for purchase. The
cost of the machine is $25,000. Each year it operates,
the machine will generate a savings of $15,000.
Given an effective annual interest rate of 18%, what
is the discounted payback period on the purchase in
the machine?
61. Consider a project that involves the investment of
$100,000 now and $100,000 at the end of year 1.
Revenues of $150,000 will be generated at the end of
years 1 and 2. What is most nearly the net present
value of this project if the effective annual interest
rate is 10%?
62. An investment of a dollars is made at the end of each
year for 3 yr, at an interest rate of 9% per year
compounded annually. What will the dollar value of
the total investment be, most nearly, upon the deposit
of the third payment? $1000 is deposited into a 9%
account today. At the end of 2 yr, another $3000 will
be deposited. In 5 yr, a $4000 purchase will be made.
Approximately how much will be left in the account
1 yr after the purchase?
Year
Cash flow ($)
0
1000
1
0
2
3000
3
0
4
0
5
-4000
6
0
63. The following schedule of funds is available to form
a sinking fund.
t = 0yr $5000
t = 1yr $4000
t = 2yr $3000
t = 3yr $2000
At the end of the fourth year, equipment costing
$25,000 will have to be purchased as a replacement
for old equipment. Money is valued at 20% by the
company. At the time of purchase, how much money
will be needed?
64. A firm borrows $2000 for 6 yr at 8%, to be repaid in
a lump sum at the end of 6 yr. At the end of 6 yr, the
firm renews the loan for the amount due plus $2000
more for 2 yr at 8%. What is most nearly the amount
of the loan renewal?
65. The followingg cash-flow diagram represents an
investment of $400 and a revenue of 2 at the end of
years one and two. Given a discount rate of 15%
compounded annually, what must approximately be
for this set of cash flows to have a net present worth
of zero?
66. A replacement electric motor is being considered for
purchase. It is capable of providing 200 hp. The
pertinent data are as follows.
Cost
$3200
Electrical Efficiency
0.85
Maintenance Cost Per Year $50
Life Expectancy
14 Уг
Salvage Value After 14 Yr $0
The motor is used for 400 h/yr and the cost of
electricity is $0.04/kW.h. (1 hp = 0.746 kW.)
What is most nearly the effective annual cost
using an interest rate of 10%?
67. Mr. Richardson borrowed $15,000 two years ago.
The repayment terms of the loan are 10% interest for
10 yr and uniform annual payments. He just made his
second payment. How much principal, most nearly,
does he still owe?
68. Mr. Richardson borrowed $15,000 two years ago.
The repayment terms of the loan are 10% interest for
10 yr and uniform annual payments. He just made his
second payment. How much principal, most nearly,
does he still owe?
69. Given that the discount rate is 15%, what is the
equivalent uniform annual cash flow for the
following stream of cash flows?
Year 0
-$100,000
Year 1
-$200,000
Year 2
-$50,000
Year 3
-$75,000
70. In 5 yr, $18,000 will be needed to pay for a building
renovation. In order to gen-erate this sum, a sinking
fund consisting of three annual payments is
established now. No further payments will be made
after the third year. What payments are most nearly
necessary if money is worth 15% per year?
71. What is the book value of equipment purchased 3 yr
ago for $15,000 if it is depreciated using the sum of
years' digits (SOYD) method? The expected life is 5
yr.
72. The purchase of a motor for $6000 and a generator
for $4000 will allow a company to produce its own
energy. The configuration can be assembled for
$500. The service will operate for 1600 h/yr for 10
yr. The maintenance cost is $300/yr, and the cost to
operate is $0.85/h for fuel and related costs. There is
$400 in salvage value for the system at the end of 10
yr. Using straight-line depreciation, what is the
annual cost for the operation?
73. Company A purchases $200,000 of equipment in
year 0. It decides to use straight-line depreciation
over the expected 20 yr life of the equipment. The
interest rate is 14%. If its overall tax rate is 40%,
what is the present worth of the after-tax depreciation
recovery
74. A person pays interest on a loan semiannually at a
nominal annual interest rate of 16%. What is most
nearly the effective annual interest rate?
75. A company has $100,000 to spend on the various
projects listed. Using these projects only, what
should this company consider its minimum attractive
rate of return to be?
76. What is most nearly the internal rate of return on the
following cash flow?
77. A steel drum manufacturer incurs a yearly fixed
operating cost of $200,000. Each drum manufactured
costs $160 to produce and sells for $200. What is the
manufacturer's break-even sales volume in drums per
year?
78. XYZ Corporation manufactures bookcases that it
sells for $65 each. It costs $35,000/yr to operate its
plant. This sum includes rent, depreciation charges
on equipment, and salary payments. If the cost to
produce one bookcase is $50, how many bookcases
must be sold each year for XYZ to avoid taking a
loss?
79. The internal rate of return of a project that involves
an initial investment with subsequent positive cash
flows is 18%. Five companies are considering the
project. Given the following respective minimum
attractive rates of return (MARR), which company
will be most likely to accept the project?
80. Two mutually exclusive projects are being
considered. Project A requires an investment of
$1,000,000 at year zero. Project A will pay
$200,000/yr forever. Project B also requires an
investment of $1,000,000 at year zero. However, it
pays $1,500,000 the next year, and nothing after that.
The internal rate of return (IRR) on project. A is
20%. The IRR for project B is 50%. Which is the
better project? The borrowing rate is 5%.
81. Which plan is the least expensive way to purchase
plant maintenance equipment? The discount rate is
11%
Plan A:
$50,000 down, equal payments of
$25,115.12 for 20 уг
Plan B: nothing down, equal payments of
$31,393.91 for 20 yr
Plan C: $100,00 down, equal payments of
$21,975.74 for 20 yr
82. 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?
Tops is in a 40% tax bracket. What percent of sales is
their profit after taxes?
The balance sheet of Allied Company is as follows.
What Is Most Nearly Its Acid Test Ratio?
83. On her recent birthday, April 22, 2001, Nicole was
given by her mother a certain sum of money as
birthday present. She decided to invest the said
amount on 20% exact simple interest. If the account
will mature on Christmas day at an amount of P
10,000.00, how much did Nicole receive from her
mother on her birthday?
84. The amount of P 20,000 was deposited in a bank
earning an interest of 6.5% per annum. Determine the
total amount at the end of 7 years if the principal and
interest were not withdrawn during this period.
85. A loan for P 50,000 is to be paid in 3 years at the
amount of P 65,000. What is the effective rate of
money?
86. What is the effective rate corresponding to 18%
compounded daily? Take 1 year is equal to 360 days.
87. What nominal rate, compounded semi-annually,
yields the same. amount as 16% compounded
quarterly?
88. Which of these gives the lowest effective rate of
interest?
A. 12.35% compounded annually
B. 11.90% compounded semi-annually
C. 12.20% compounded quarterly
D. 11.60% compounded monthly
89. If P 5,000.00 shall accumulate for 10 years at 8%
compounded quarterly, find the compounded interest
at the end of 10 years.
90. A sum of P 1,000 is invested now and left for eight
years, which time at the principal is withdrawn. The
interest has accrued is left for another eight years. If
the effective annual interest rate is 5%, what will be
the withdrawal amount at the end of the 16th year?
91. A student plan to deposit P 1,500 in the bank now
and another P 3,000 for the next 2 years. If he plans
to withdraw P 5,000 three years from after his last
deposit for the purpose of buying shoes, what will be
the amount of money left in the bank after one year
of his withdrawal? Effective annual interest rate is
10%.
92. If P 500,000 is deposited at a rate of 11.25%
compounded monthly, determine the compounded
interest after 7 years and 9 months.
93. What is the present worth of two P 100 payments at
the end of the third year and fourth year? The annual
interest rate is 8%.
94. Alexander Michael owes P 25,000.00 due in 1 year
and P 75,000 due in 4 years. He agrees to pay P
50,000.00 today and the balance in 2 years. How
much must he pay at the end of two years if money is
worth 5% compounded semi-annually?
95. Find the difference between simple interest and
compound interest on a savings deposit of P 50,000
at 10% per annum for 3 years.
96. A credit plan charges interest rate of 36%
compounded monthly. Find its effective rate.
97. On January 1, 1999, Miss Jocelyn Del Rosario
opened an account at Bank of Philippine Islands with
an initial deposit of P 1,000,000.00. On March 1,
2000, she opened an additional P 1,000,000.00. If the
bank pays 12% interest compounded monthly, how
much will be in the account on April 1, 2000?
98. The Philippine Society of Mechanical Engineers is
planning to put up its own building. Two proposals
being considered are:
A. The construction of the building now to cost
P400,000.
B. The construction of a smaller building now to
cost P300,000 and at the end of 5 years, an
extension to be added to cost P 200,000
What is the difference in amount between the two
proposals, if interest rate is 20%, depreciation to be
neglected and by how much?
99. If money is worth 5% compounded quarterly, find
the equated time for paying a loan of P 150,000 due
in 1 year and P 280,000 due in 2 years.
100. On his 6th birthday a boy is left an inheritance.
The inheritance will be paid in a lump sum of P
10,000 on his 21st birthday. What is the present value
of the inheritance as of the boy's 6th birthday, if the
interest is compounded annually? Assume i = 4%.
101. Find the present value of installment payments of
P 1,000 now, P 2,000 at the end of the first year, P
3,000 at the end of the second year, P 4,000 at the
end of the third year and P 5,000 at the end of the
fourth year, if money is worth 10% compounded
annually.
102. What is the present worth of a P500 annuity
starting at the end of the third year and continuing to
the end of the fourth year, if the annual interest rate is
10%?
103. Today, a businessman borrowed money to be
payments for 10 quarters. If the interest rate is
quarterly and the quarterly payment is P 2,000,
borrow? paid in 10 equal 10% compounded how
much did he borrow?
104. A manufacturer desires to set aside a certain sum
of money to provide funds to cover the yearly
operating expenses and the cost of replacing every
year the dyes of a stamping machine used in making
radio chassis as model changes for a period of 10
years.
Operating cost per year = P 500.00
Cost of dye
= P 1,200.00
Salvage value of dye
= P 600.00
The money will be deposited in a saving account
which earns 6% interest. Determine the sum of
money that must be provided, including the cost of
the initial dye.
105. A factory operator bought a diesel generator set
for P 10,000.00 and agreed to pay the dealer uniform
sum at the end of each year for 5 years at 8% interest
compounded annually, that the final payment will
cancel the debt for principal and interest. What is the
annual payment?
106. A man borrowed P 300,000 from a lending
institution which will be paid after 10 years at an
interest rate of 12% compounded annually. If money
is worth 8% per annum, how much should he deposit
to a bank monthly in order to discharge his debt 10
years hence?
107. A man loans P 187,400 from a bank with interest
at 5% compounded annually. He agrees to pay his
obligations by paying 8 equal annual payments, the
first being due at the end of 10 years. Find the annual
payments.
108. A person buys a piece of lot for P 100,000
downpayfment and 10 deferred semi-annual
payments of P 8,000 each, starting three years from
now. What is the present value of the investment if
the rate of interest is 12% compounded semiannually?
109. How much must be deposited at 6% each year
beginning on January 1, year 1, in order to
accumulate P 5,000 on the date of the last deposit,
January 1, year 6?
110. A piece of machinery can be bought for P 10,000
cash or for P 2,000 down and payments of P 750 per
year for 15 years. What is the annual interest rate for
the time payments?
111. A house and lot can be acquired by a
downpayment 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 cash price of the property?
112. A young engineer borrowed P 10,000 at 12%
interest and paid P 2,000 per annum for the last 4
years. What does he have to pay at the end of the
fifth year in order to pay off his loan?
113. Mr. Cruz plans to deposit for the education of his
5 years old son, P 500 at the end of each month for
10 years at 12% annual interest compounded
monthly. The amount that will be available in two
years is
114. A parent on the day the child is born wishes to
determine what lump sum would have to be paid into
an account bearing interest at 5% compounded
annually, in order to withdraw P 20,000 each on the
child's 18th, 19th, 20th and 21st birthdays. How
much is the lump sum amount?
115. Maintenance cost of an equipment is P 200,000
for 2 years, P 40,000 at the end of 4 years and P
80,000 at the end of 8 years. Compute the semiannual amount that will be set aside for this
equipment. Money worth 10% compounded
annually.
116. A small machine has an initial cost of P 20,000, a
salvage value of P 2,000 and a life of 10 years. If
your cost of operation per year is P 3,500 and your
revenues per year is P 9,000, what is the approximate
rate of return (ROR) on the investment?
117. Mr. Ramirez borrowed P 15,000 two years ago.
The terms of the loan. are 10% interest for 10 years
with uniform payments. He just made his second
annual payment. How much principal does he still
owe?
118. A man inherited a regular endowment of P
100,000 every end of 3 months for 10 years.
However, he may choose to get a single lump sum
payment at the end of 4 years. How much is this
lump sum if the cost of money is 14% compounded
quarterly?
119. Given the cash flow diagram as shown. If interest
rate is 10%, determine the equivalent total present
worth.
120. Basketball superstar Vince Carter, playing for
Toronto Raptors is earning an average annual salary
of $ 5,000,000 for 10 years. Chicago Bulls ball club
would like to acquire his services as a replacement of
the retired Michael Jordan, offered him an initial
annual salary of $ 3,000,000 but is increasing at the
rate of $ 400,000 annually. If he can still play in the
NBA for 10 years and money is worth 10%, which of
the following is true?
121. John Grisham, author of the best selling novel
"The Chamber" sold its copyright to Warner Bros.
for the rights to make it into a motion picture.. Mr.
Grisham's has options between the following Warner
Bros. proposals:
A. An immediate lump sum payment of $ 3,500,000.
B. An initial payment of $ 2,500,000 plus 4% of the
movie's gross receipts for the next 5 years which
is forecasted as follows:
If money is worth 10% and Mr. Grisham will not
receive any royalty after the fifth year of exhibition of
the movie, which of the following is true?
122. A newly-acquired equipment requires an annual
maintenance costs of P 10,000. If the annual
maintenance cost is increased by 20% each year
every year for 10 years, what is the estimated present
worth of the maintenance costs if money is worth
15%?
123. A company issued 50 bonds of P 1,000.00 face
value each, redeemable at par at the end of 15 years.
To accumulate the funds required for redemption the
firm established a sinking fund consisting of annual
deposits, the interest rate of the fund being 4%. What
was the principal in the fund at the end of 12th year?
124. AP 1,000,000 issue of 3%, 15-year bond was sold
at 95%. What is the rate of interest of this
investment?
125. A P1,000, 6% bond pays dividend semiannually
and will be redeemed at 110% on June 21, 2004. It is
bought on June 21, 2001 to yield 4% interest. Find
the price of the bond.
126. A VOM has a 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?
127. A machine costs P 8,000 and an estimated life of
10 years with a salvage value of P 500. What is its
book value after 8 years using straight line method?
128. A company purchases an asset for P 10,000.00
and plans to keep it 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.
129. An asset is purchased for P 500,000.00. The
salvage value in 25 years is P100,000.00. What is the
total depreciation in the first three years using
straight-line method?
130. ABC 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
SYD method.
131. The cost of equipment is P 500,000 and the cost
of installation is P 30,000. If the salvage value is 10%
of the cost of equipment at the end of 5 years,
determine the book value at the end of the fourth
year. Use straight-line method.
132. A machine has an initial cost of P 50,000.00 and
a salvage value of P 10,000.00 after 10 years. What is
the straight line method depreciation rate as a
percentage of the initial cost?
133. 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 of the declining book value. What is the
annual rate of depreciation in %?
134. An engineer bought an equipment for P 500,000.
He spent an additional amount of P 30,000 for
installation and other expenses. The estimated useful
life of the equipment is 10 years. The salvage value is
x% of the first cost. Using the straight line method of
depreciation, the book value at the end of 5 years will
be P 291,500. What is the value of x?
135. The initial cost of a paint sand mill, including its
installation, is P 800,000. The BIR approved life of
this machine is 10 years for depreciation. The
estimated salvage value of the mill is P 50,000 and
the cost of dismantling is estimated to be P 15,000.
Using straight-line depreciation, what is the annual
depreciation charge and what is the book value of the
machine at the end of six years?
136. A unit of welding machine cost P 45,000 with an
estimated life of 5 years. Its salvage value is P 2,500.
Find its depreciation rate by straight-line method.
137. A consortium of international telecommunication
companies contracted for the purchase and
installation of fiber optic cable linking Manila City
and Cebu City at a total cost of P 960 million. This
amount includes freight and installation charges
estimated at 10% of the above total contract price. If
the cable shall be depreciated over a period of 15
years with zero salvage value and money is worth 6%
per annum, what is the annual depreciation charge?
138. A machine initially worth P 50,000 depreciates in
value each year by 20% of its value at the beginning
of that year. Find its book value when it is 9 years
old.
139. An asset is purchased for P 9,000.00. Its
estimated economic life is 10 years after which it will
be sold for P 1,000.00. Find the depreciation in the
first three years using sum-of-years' digit method.
140. Shell Philippines, a multinational company, has a
total gross income for a particular year of P
50,000,000. The taxable income after taking all
deductions except for depletion is P 18,500,000.
What is the allowable depletion allowance for that
particular year? Take percentage of gross income for
oil as 22%.
141. The Saudi Arabian Oil Refinery developed an oil
well which is estimated to contain 5,000,000 barrels
of oil at an initial cost of $ 50,000,000. What is the
depletion charge during the year where it produces
half million barrels of oil? Use Unit or Factor method
in computing depletion.
142. The first cost of a certain equipment is P 324,000
and a salvage value of P 50,000 at the end of its life
of 4 years. If money is worth 6% compounded
annually, find the capitalized cost.
143. An item is purchased for P 100,000. Annual cost
is P 18,000. Using interest rate of 8%, what is the
capitalized cost of perpetual service?
144. A piece of equipment was purchased for P
4,000,000. The useful life is estimated at 5 years with
no salvage value. The equipment is estimated to be
used for 1,000 hours per year. Operating costs are as
follows:
Fuel : 10 liters per hour, P 10 per liter
Oil : 1 liter per hour, P 20 per liter
Grease : 2 liters per hour, P 5 per liter
The equipment uses 6 tires costing P 60,000 each.
Cost of money is 15% per year. Cost of insurance,
taxes, storage, etc. is 15% per year. The interest table
needed for this problem is given in the figure.
Determine the cost of using the equipment and tires,
in pesos per hour.