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2-24. the surface area of a certain plant requires painting is 8,000 sq. ft. Two kinds of paint areavailable whose brands are A and B. Paint A cost P 1.40 per sq. ft. but needs renewal at the end of 4yrs., while paint B cost P 1.80 per sq. ft. If money is worth 12% effective, how often should paint B berenewed so that it will be economical as point A?Given:A=surface area of the plant (8,000 sq. ft.)For paint A:P 1.40 per sq. ft. = 4 yrs.For paint BP 1.80 per sq. ft.Solution:Cost of renewal for paint A: Let –
In order to be economical as Paint A, – Answer: 5.58 years2-25. A contract has been signed to lease a building at P20,000 per year with an annual increase ofP1,500 for 8 years. Payments are to be made at the end of each year, starting one year from now. Theprevailing interest rate is 7%. What lump sum paid today would be equivalent to the 8-year lease-payment plan?Given: A= P20,000G= P1,500n=8yearsi=7%Solution: Answer: P147,609.3773
CHAPTER 3DepreciationSolved Supplementary Problems3-1. A machine shop purchased 10 years ago a milling machine forP60,000. A straight-linedepreciation reserve had been provided based on a 20-year life of the machine. The owner of themachine shop desires to replace the old milling machine with a modern unit having many advantagescosting P100,000. It can sell the old unit forP20, 000. How much new capital will be required for thepurchase?Solution:Assume that no scrap value at the end of 20 years, Cn = 0.The depreciation d of a milling machine with an srcinal costC oof P60, 000 10 years agohaving a machine life of 20 years isd = , d == P3,000.00After 10 years, the depreciationwould beD10= 10d = 10 (P3,000.00) = P30,000.00and the total amount available would beTotal Amount Available = P30, 000.00 + P20, 000 = P50, 000Therefore the new capital required would be the difference of the cost of the modern unit andthe total amount available for the purchase of the milling machineNew Capital Required = P100, 000 - P50, 000New Capital Required = P50, 0003-2. A tax and duty free importation of a 30-horsepower sand mill for paint manufacturing costs