Question

1. A P1,000,000 issue of 3% 15 year bonds was sold at 95%. If miscellaneous initial expenses of the financing were P20,000 and yearly expenses of P2,000 is incurred, what is the true cost, in %, to the company is paying for thing money it borrowed?

2. A certain equipment which cost P500,000 when brand new has a salvage value of x pesos and is expected to last for 23,000 hours in a period of 5 years. In the first year of service it was used for 7,000 hours. If the book value of the equipment is P350,000 at the end of the first year, what is the value of "x" in pesos?

3. A company owns earth moving equipment that cost P100,000. After 8 years it will have an estimated salvage value of P18,000. Compute the book value, in pesos, at the end of 5 years using double declining balance method.

4. An equipment costs P70,000 has a life of 8 years and salvage value of "x" after 8 years. If the book value of the equipment at the 4th year is equal to P4,567, compute the salvage value "x", in pesos, using the sum of the year digit method.

5.  A dump truck was bought for P130,000 six years ago. It will have a salvage value of P3,000 four years from now. It is sold now for 8,000. What is the sunk cost, in pesos, if the depreciation method used is sinking fund method at 6%?

Answer 1