5. A pump costs 50,000P and the useful life is 10 years.

Find the book value after 8 years by

double declining balance method (DDBM).
Given: Find:

C0 = 50,000 P C8 =?
n = 8 yrs
L = 10 yrs

Formula:

2 n
C n=C 0 (1− )
L
Solution:

2 n
C 8=C 0 (1− )
L
2 8
C 8=50,000 P(1− )
10
8
C 8=50,000 P(0.8)

C 8=50,000 P(0.16777216)
C 8=8,388.61 P∨8,389.00 P
12. A car costs 800,000P 4 years ago and the salvage value is 50,000P 6 years from now. If it is
to be replaced by a new one and the trade in value is 450,000P find the sunk cost if money
worth’s 12%.
Given: Find:

C0 = 800,000 P SC (Sunk Cost) =?

n = 4 yrs
L = 10 yrs (4 yrs + 6 yrs)
CL = 50,000 P
Resale Value = 450,000 P
i = 12% or .12

Formula:

a. D n=
(
( 1+i )n−1
( 1+ i ) L −1 )
( C0 −C L )
b. C n=C 0−Dn
c. SC=Cn −Resale Value

Solution:

Solving for D4

D4 =
( ( 1+i )n −1
( 1+i )L −1)( C 0−C L )

D4 =
(
( 1+0.12 )4 −1
( 1+0.12 )10−1 )
( 800,000 P−450,000 P )

D4 = ( 2.105848208
0.57351936
) ( 750,000 P )
D 4 =( 0.272345011 )( 750,000 P )

D 4 =204,259.5085 P

Solving for Cn
C 4=C 0−D 4
C 4=800,000 P−204,259.5085 P
C 4=¿595,740.5085 P
 Solving for SC

SC=C4 −ResaleValue
SC=595,740.5085 P−450,000 P
SC=145,740.51 P∨145,741.00 P
19. A machine cost 80,000P and the salvage value is 20,000P after 20 years. Find the sinking
fund factor if interest rate is 8% per year.
Given: Find:

Co = 80,000 P SFF (Sinking Fund Factor) =?

CL = 20,000 P
L = 20 yrs
i = 8% or 0.08

Formula:

i
SFF=
(1+i)L −1
Solution:

i
SFF= L
(1+i) −1
0.08
SFF=
(1+ 0.08)20−1
0.08
SFF=
(1.08)20−1
0.08
SFF=
4.66095714−1
0.08
SFF=
3.66095714
SFF=0.0218522088∨0.0219