ST.
VINCENT COLLEGE
Leganes Pototan Ivisan
M PFE4 MA2 – MANAGEMENT ACCOUNTING II FINALS QUIZ#1
GENERAL INSTRUCTION: Write only the letter of your choice on the answer sheet provided below. Answers should be in CAPITAL LETTERS.
Erasures are not allowed.
Test I. Read the following statements carefully and choose the
letter of the correct answer. 2 points for each 5. Buknoy is planning to purchase a new machine for
P150,000. The machine has an estimated useful life
ITEMS 1-2 ARE BASED ON THE FOLLOWING PROBLEM of four years with no salvage value. It will be
depreciated on a straight line basis.
Fermin Printers, Inc. is planning to replace its present printing
equipment with a more efficient unit. The new equipment will cost In evaluating the proposal to acquire the new
P500,000, with a five-year useful life, no salvage value. machine, the company’s accountant calculated the
book value rate of return to be 12% based on the
The old unit was acquired three years ago for P500,000. The initial investment in the new machine. The new
company uses the straight-line method in depreciating its machine is expected to produce annual net after-tax
depreciable assets. The old unit is being depreciated at P62,500 cash inflows from operations of
per year. If the new equipment is acquired, the old one will be sold
for P100,000. Otherwise, the company will just continue using it a. P37,500 c. P55,500
for 5 years. b. P45,000 d. None of the choices
Cash operating costs are P100,000 and P230,000 for the new and 6. Duke University is considering buying a new machine
old equipments, respectively. Income tax is at the rate of 32% of which will require an initial outlay of P15,000. The
income before tax. company estimates that over the next four years this
machine would save P6,000 per year in cash
1. The increase in annual net income as a result of operating expenses. At the end of four years, the
acquiring the new equipment is? machine would have no salvage value. The
company’s cost of capital is 10%. The net present
a P69,700 c. P69,200 value of this investment is
.
b P62,900 d. None of the choices a. (P12,632) c. P2,484
. b. P4,020 d. None of the
choices
2. What is the net cost of investment in the new equipment
for decision-making purposes? 7. For new equipment acquisitions, Melba C.
Corporation has set a payback goal of 4 years and a
a P232,000 c. P468,000 desired rate of return of 25% based on initial
. investment. An equipment to be used in Melba C.
b P332,000 d. None of the choices Corporation’s Forming Department is being
. evaluated. Data pertaining to the equipment are as
follows:
3. Statement 1: The payback capital budgeting technique
considers income over entire life of project. Cost of the equipment P1,800,000
Statement 2: The payback capital budgeting technique Useful life 10 years
considers time value of money. Salvage value at the end of the useful life 0
a YES, YES c. NO, NO Melba C. Corporation is subject to 40% income tax
. rate. It uses the straight-line method in computing
b NO, YES d. YES, NO depreciation.
.
To meet Melba C. Corporation’s payback goal, the
4. Bogoy Corporation has determined that if a new new equipment must generate savings in annual cash
equipment costing P150,000 is purchased, the operating costs of
company’s net income will increase by P10,000 per year.
If the new equipment will be depreciated using the a. P630,000 c. P700,000
straight-line method over a period of six years to a zero b. P880,000 d. None of the choices
salvage value, the payback period is
a 4.15 years c. 3.75 years
.
b 4.29 years d. None of the choices
.
ITEMS 8-10 ARE BASED ON THE FOLLOWING PROBLEM
The Super Carry, a domestic shipping line, has recently
commissioned a new passenger ship, the SC-20. The new ship
can carry up to 2,000 passengers. It was purchased by Super
Carry at a cost of P300 million. Its estimated service life is 10
years, with a salvage value of P40 million at the end of its service
life.
SC-20 is expected to have 300 voyage-days per year with an
average of 80% occupancy rate. The revenue from each
passenger is estimated at P270 per day, while daily variable costs
per passenger is P130.
Annual fixed costs of operating the ship, inclusive of depreciation,
is estimated at P49 million per year. Supper Carry pays tax at a
rate of 35% of income before tax.
Based on the given data, answer the questions that follow.
8. What is the annual net cash inflow from operating SC-
20?
a P38,730,000 c. P11,830,000
.
b P83,370,000 d. None of the choices
.
9. In how many years can Super Carry recover the initial
cost of investment in SC-20?
a 25.36 years c. 6.53 years
.
b 7.93 years d. None of the choices
.
10. What is the accounting rate of return based on the
average investment in SC-20?
a 6.98% c. 3.48%
.
b 3.94% d. None of the choices
.
ANSWER SHEET – PFE4 MA2 FINALS QUIZ NO.1
NAME: CYS: DATE:
ST. VINCENT COLLEGE
Leganes Pototan Ivisan
1. 6. 11. 16.
2. 7. 12. 17.
3. 8. 13. 18.
4. 9. 14. 19.
5. 10. 15. 20.
