ECONCHE_ Quiz3 Gnd 4 JULY 23, 2012 INSTRUCTIONS: 10. 1, Closed books and notes 2. Use the big DLSU examination booklet. Put your clean solution in the front pages and the scratch in the back pages. 3. Indicate your final answer with a box. Mutiple choice: Write the letter corresponding to the correct answer. The following are types of depreciation caused by the passage of time except, a. Functional c. Physical b. Depletion 4. Normal Which is true? a. Depreciation is the increase in value of physical properties due to time and use b. Depreciation, in accounting, is considered an asset. ¢. Real properties, like land, depreciates. 4, Depreciation is considered a non-cash type of cost. ‘The value of a physical asset at the end of its useful life where the asset can be sold as a second hand. a. Book value . Salvage value b. Junk value d. Market value ‘The following are required when selecting the method for depreciation except, ‘a. It should be allowed by BIR b. It should recover capital invested on the property ©, It should be complicated 4d. The book value should not be greater than the actual value at any time, ‘The depreciation that allows the fastest rate of depreciation on the first year. a. Straight line method ¢. Sinking fund method . Decli 4d. Sum of the years’ digit method When engineering projects are evaluated, the recommended method of depreciation is__. a. Straight line method c. Sinking fund method b. Declining balance method 4. Sum of the years’ digit method Economic life of an asset is greater than its physical life. (a) True or (b) False ‘An oil refinery has decided to purchase drilling equipment for $550,000. The equipment will be kept for 10 years before being sold. The estimated salvage value for depreciation purposes is to be $25,000. The straight line annval depreciation on this equipment is__. ‘a. $50,000 ©. $52,500 b. $51,000 4. $55,000 Referring to problem in (8), the replacement cost of the equipment at the end of the depreciable life is__. a, $550,000 ©. $35,000 b. $525,000 d. $55,000 If the double declining balance method is used in problem (8) and salvage value at the end of the life is zero, the first year depreciation is_. a. $55,000 ©. $105,000 b. $101,000 d. $110,000. IL. Solve the following problems: 1. The original investment for an asset was $10,000, and the asset was assumed to have a service life of 12 years with $2000 salvage value at the end of the service life. After the asset has been in use for 5 years, the remaining service life and final salvage value are re-estimated at 10 years and $1000, respectively. Under these conditions, what is the depreciation cost during the sixth year of the total life if straight-line depreciation is used? 2. The original cost of a property is $30,000, and it is depreciated by a 6 percent sinking-fund method. What is the annual depreciation charge if the book value of the property after 10 years is the same as if it had been depreciated at $2500/year by the straight-line method? 3. A material testing machine was purchased for Php2M and used for five years. At the end of five years, its salvage was PhpS0,000. Tabulate the yearly depreciation and the end of the year book value for 5 years using the Sum of the Years Digit (SYD) Method. Your table must be in the format below. DEPRECIATION FOR THE YEAR | BOOK VALUE AT END OF THE YEAR lols 4. An ore crusher has been bought for $60,000 and it has an estimated salvage value of $10,000 at the end of its five-year life. Engineers have estimated that the following units of production (in mm’ of crushed ores) will be contracted over the next five years: YEAR I 2 3 4 3 m 16,000 24,000 36,000 16,000 8,000 Using the Unit of Production method, what is the total depreciation after three years? What is the book value at the end of Year 2.LO: two 9 L= lyyes | nitit erage Cuz ftom te Sy b= ya tinal = fio J sage Wa = 2? ic = Rigid + De =? Wing wthaiafie- Lin muds, 410,000 - 21000 wf 4 5 HOT oe O5 = tub.) (5) = B 9903.95 - (6 = fio - fama =the ud f= pc, De = Svot(v) = de =f s400.09 | Zaga to= $30.000 i= 6h sinring- mudi, ipa L= {0 d= FAM yr by straight-une method $ yco0-_ 10 5h he # 6.0 + [ F ira =f anaes ee =f w000 \ ar ee : al d= Beet yc a a le elGt = ? 4,000,000 Ls Syst = ? 50,000 . tee p g.000,000-P 50.000 = b n95,000 Rigid + tomplete Whe tabu Weing YD Method r t =| 8 0 bY ve.coo | LF fro.co> | mm 000 = 2 0, 00 [ga.00 = [30,000 _=Z 4 = 6, 000 1e.000 TL = M0004 24,000 + 361000 + i000 + 2.000 < 100,000 m3 ——f.—t.o00 = 10,000 Bas ive.000 m My 000 4,000 Son Da = SF (wo00 +f, e00 + 56,100 =f @haeo S [og = 38, 000 Daz ESF ( 1000+ 24,000 ) = $0000 7 las 60.00 - 2.000 [te = ihe t