1. An asset is purchased for P20,000.00. Its estimated life back P4,500 each year for two years.

ars. If an interest rate of

is 10 years after which it will be sold for P12,000.00. Find 5% is used, which alternative is superior?
the depreciation for the first year using sum of years’ digit
method. Ans.: Investment A

a. P1,545.45 b. P1,454.54 10. Capital (money) that is lost and cannot be recovered.
c. P1,344.21 d. P1,245.45 a. investment b. sunk cost
c. book value d. salvage value
2. A VOM has a selling price of P400. If its selling price is
expected to decline at a rate of 10% per annum due to 11. Which of the ff. alternatives is superior over a 30-day
obsolescence, what will be its selling price after 5 years? period is the interest rate is 9%?

a. P231.56 b. P236.20 Investment A Investment B

c. P212.90 d. P222.56 Type Brick Wood
Life 30 years 10 years
3. What rate of interest compounded annually is the same Initial cost $1800 $450
as the rate of interest of 8% compounded quarterly? Maintenance $12/year $25/year

a. 8.07 % b. 8.12% Ans.: Investment A

c. 8.16% d. 8.24%
12. Compound interest rate on unpaid or unrecovered
4. The sum of money as receipts or disbursements in a balances such that the fi nal amount results in a zero
project’s financial records. balance

a. present worth b. annual cost a. net cash flow b. gross income

c.cash flow d. interest rate c. rate of return d. present worth

5. Activities have added worth to a product or service from 13. Expected trade-in or market value when an asset is
the perspective of a consumer, owner, or investor who is traded or disposed of
willing to pay more for an enhanced value.
a. value added b. direct cost a. salvage value b.interest
c. break even d. sunk cost c. book value d. annual operating cost

6. A savings and loan offers a 5.25% rate per annum 14. In five years, P22,000 will be needed to pay for a
compound daily over 365 days per year. What is the building renovation. In order to generate this sum, a sinking
effective annual rate? fund consisting of three annual payments in established
now. For tax purposes, no further payment will be made
a. 5.34% b. 5.13% after three years. What payments are necessary if money is
c. 5.39% d. 5.05% worth 18% per annum?

7. If P7,000 shall accumulate for 10 years at 5% a. P 4522.81 b. P 4521.81

compounded quarterly, then what is the compounded c. P 4422.81 d. P 4421.81
interest at the end of 10 years?
15. What annuity is required over 15 years to equate with a
a. P 4505.34 b. P 4605.34 future amount of 25,000? Assume i=7%
c. P 4506.34 d. P 4606.34
a. P 954.87 b. P 974.87
8. Find the compound amount if P2,500 is invested at 8% c. P 944.87 d. P 984.87
compounded quarterly in 5 years and 6 months.
16. Find the annual payment to extinguish a debt of
a. P 3,864.95 b. P 3,846.59 P16,000 payable for 7 years at 15% interest annually.
c. P 3,889.95 d. P 3,844.95
a. P 3745.77 b. P 3675.77
9. Invest A costs P10,000 today and pays back P11,500 two c. P 3855.77 d. P 3845.77
years from now. Investment B costs P8,000 today and pays
17. Find the present value in pesos, of a perpetuity of 24. A machine costs Php 400,000 with a salvage value of
18,000 payable semi – annually if money is worth 9% Php 200,000. Life of it is six years. In the first year, 4000
compounded quarterly. hours. In the second year, 6000 hours and 8000 hours on
the third year. The expected flow of the machine is 38000
a. 395,550.06 b. 395,555.06 hours in six years. What is the depreciation at the end of
c. 395,650.06 d. 395,655.06 the second year?

18. A man loans P187,400 from a bank with interest at 4% a. P 61,000 b. P 62,000
compounded annually. He agrees to pay his obligations by c. P 63,000 d.P 60,000
paying 8 equal annual payments, the first being due at the
end of 10 years. Find the annual payments 25. A coin machine costing Php 200,000 has a salvage
value of Php 20,000 at the end of its economic life of five
a. P 39,620.63 b. P 39,616.63 years. Determine the annual reserve for depreciation for the
c. P 39,618.63 d. P 39,617.63 third year only. The schedule of production per year is as
follows:
19. It costs $1000 for hand tools and $1.50 labor per unit to
manufacture a product. Another alternative is to Year Number of coins
manufacture the product by an automated process that cost 1 100,000
$15000 with a $0.50 per unit cost. With an annual 2 80,000
production rate of 5000 units, how long will it take to reach 3 60,000
the break – even point? 4 40,000
a. 2 years b. 2.8 years 5 20,000
c. 3.6 years d. never
a. P 35,000 b. P 37,000
20. A machine is purchased for $1000 and has a useful life c. P 36,000 d. P 38,000
of 12 years. At the end of 12 years, the salvage value is
$130. By straight – line method, what is the book value of
the machine at the end of 8 years?

a. $290 b. $330
c. $420 d. $580

21. The equipment bought at a price of Php 450,000 has an

economic life of 5 years and a salvage value of Php 50, 000.
The cost of money is 12% per year. Compute the first year
depreciation using Declining Balance Method.

a. P 160,100 b. P 160,200
c. P 160,150 c. P 160,250

22. An equipment costs Php 1,500,000. At the end of its

economic life of five years, its salvage value is Php
500,000. Using Sum of the Years Digit Method of
Depreciation, what will be its book value for the third year?

a. P 700,000 b. P 600,000
c. P 800,000 d. P 500,000

23. A machine costs Php 300,000 with a salvage value of

Php 50,000 at the end of its life of 10 years. If money is
worth 6% annually, use Sinking Fund Method and
determine the depreciation at the 6th year.

a. P 132,300.79 b. P 131,300.79
c. P 133,200.79 d. P 131,200.79