Practice Problems
1. Problem solving 11 An equipment costs P7,000, last 8 years and as a
resale value at Determine e the depreciation charge during the 4 th the
end of life of F1350. Year and the book value at the end of 4 years in
interest rate of 6% by: (5 points each)
1) Straight Line Method
Answer: d=831.25
Dn=3325
Bv=3675
2) ii) Declining Balance Method
Answer: Dn=711
BV=1567
3) iii) Double Declining Balance Method
Answe:Dn=738.28
BV=2215
4) iv) Sinking Fund Method
Answer:d=250.34
Dn=1095.14
BV:5904.86
5) v) Sum of Year Digit Method
Answer:d=924
Dn=4803
2. An equipment costing P320,000 was purchased using a loan at 12%
per annum. It requires P21,000 per year to maintain the usefulness of
the equipment. What is the capitalized cost of Using the machine? (15
points)
Answer: 49500
3. A latte machine costs P300,000 brand new with salvage value of “x”
pesos. The machine is expected to last for 28500 hours is a period of 5
years. In the first year of service it was used for 333 days and 8 hours.
If the book value at the end of the first year is P220,000, compute for
the salvage value “x” in pesos. (15 points)
Answer:15000
4. Find the present value in pesos, of a perpetuity of P12,000 payable
monthly if money is worth 8% compounded continuously. (15 points
Answer:1794016.95
5. ) 5. A machine which cost P50,000 when new has a 10-year lifetime
and a salvage value equal to 10% of its original value. Determine the
capital recovery based upon an interest rate of 8% per year
compounded bi-monthly (15 points)
Answer:1161
6. A contractor has 50 men of the same capacity at work on a job. They
can complete the job in 30 days, the working day being 8 hours but the
contract expires in 20 days. He decides to put 20 additional men. If all
the men get P3 per day for a full or part day and the liquidated
damages are P100 for every full or part day he requires over his
contract, how many days could he finish the job? (15 points)
Answer:21.4 or says 22 days
7. Compute the discount if P2,000 is discounted for 6 months at 8%
simple interest.
Answer:76.92
8. A marketing company established a program to replace the cars of its
sales representative at the end of every 5 years. If the present price of
the approved type of the end of 5 years of 60% its present value, how
much money must the company accumulate for 5 years if inflation
annually is 10%. Release value will also appreciate at 10% yearly.
Answer:120289.51
9. Kathy buys a television set from an appliance center who asks P1,250
at the end of 60 days (cash in 60 days). Kathy wishes to pay
immediately and the appliance center offers to compute the cash price
on the assumption that money is worth 8% simple interest. What is the
cash price?
Answer:1233.55
10. What simple interest rate is equivalent the simple discount rate
of 6% in discounting an amount P1,000 due at the end of 2 months.
Answer:6.06%
11. In year zero, you invest P10,000 is a 15% security for 5 years.
During that time the average annual inflation is 6%. How much, in
terms of year zero dollars, will be in the account at maturity.
Answer:15030.03
12. An employee obtained a loan of P100,000 at the 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?
Answer:1110.21
13. A parent on the day the child is born wishes to determine what
lump sum would have to be paid into an account annually with 5%
annual interest, in order to withdraw P40,000.00 each on the child’s
18th, 19th, 20th and 21st birthday.
Answer:61883.46
14. A machine has a first cost of P800,000 and a salvage value of
P50,000 at the end of its life after 10 years. The annual savings for the
use of the machine amounts to P124,900.97. If the annual
maintenance cost of machine is P4,000 and the sinking fund to recover
depreciation earns 6%, compute the rate of return of investment 08 3.
Compute the difference in the future amount of P500 compounded
annually at nominal rate of 5% and if it is compounded continuously for
5 years at the same rate.
Answer:3.87
14.American Express Corp. charges 1½% interest per month,
compounded continuously on the unpaid balance purchases made on this
credit card. Compute the effective rate of interest.
Answer:19.72
15.The first cost of a certain equipment is P324,000 and a salvage value
of P50,000 at the end of its life for 4 years. Money is worth 6% annually. If
there is no salvage value and the annual maintenance cost is P18,000,
find the capitalized cost of perpetual service.
Answer:624000
