Midterm Quiz1: Depreciation

March 11, 2021

1. A machine costs P900,000 and will have a salvage value of P450,000 when retired at the end
of 5 years. Which method will give the highest book value after two years?
a. SYDM b. SLM c. DBM d. SFM, i=10pa%

2. The salvage value of the equipment is P100,000 with a service life of 10 years. The annual
depreciation on the 5th year was P81,879 using DBM. What was its annual depreciation on the
7th year?
a. P81,879 b. P51,645 c. P89,305.10 d. P65,053

3. A certain equipment has an installed cost of P500,000 and service life of 10 years and is
being charged an annual depreciation cost of P25,000. The owner decided to sell it after 5
years for P350,000. Was his decision justifiable? Justify your answer. Money is worth 8%
pa .
a. Yes b. No

4. A firm purchased and placed in service a new piece of semi-conductor equipment The cost basis for
the equipment is P1,000,000. Determine the book value after the 3rd year using Modified Accelerated
Cost Recovery System (MACRS). Cost recovery period is 5 years
a. P 288,000 b. P 212,000 c. P242,000 d. P115,200
5. The original cost of a certain piece of equipment is P500,000 and is depreciated by a 10%
sinking fund method. Determine the annual depreciation charge if the book value of the
equipment after 10 years is the same as if it had been depreciated at P40,000 each year by
straight line formula.
a. P22,794 b. P25,098 c. P23,113 d. P23,600

6. A machine costs P900,000 and will have a salvage value of P200,000 when retired at the end
of 5 years. Using sum-of-the-years digit method, what is the Book value after two years?
a. P480,000 b. P485,000 c. P450,300 d. P394,100