A machine costs Php 332,631 with a salvage value of Php 44,647 at the end of...

A machine costs Php 332,631 with a salvage value of Php 44,647 at the end of its life of 11 years. If money is worth 5% annually, use Sinking Fund Method and determine the depreciation at the 2th year. MANUAL SOLUTION PLEASE

Expert Solution

Sinking fund method is based on the assumption of setting up a sinking fund in which money accumulates to replace the existing asset at the proper time.

The method changes annually to revenue account search some as with compound interest will amount to to the cost of the asset at the end of the useful life.

The identical sum is charged every year as depreciation.

this is invested outside the business so that from the end of the second year and each subsequent year the interest is added.

At the end of the useful life of , the total amount in depreciation + compound interest should be equal to the original cost of the fixed asset.

this is the only method of calculating the depreciation which provides cash for the replacement of assets at the end of the useful life forecast for it.

Rahul Sunny answered 1 year ago

A new machine costs $42,000 and has a $2000 salvage value at the end of its...

A new machine costs $42,000 and has a $2000 salvage value at the end of its 8-year useful life. Determine the straight-line (SL), and the double declining balance (DDB) depreciation schedules for the machine.

Polycorp is considering the purchase of a machine for $600,000. The salvage value at the end...

Polycorp is considering the purchase of a machine for $600,000. The salvage value at the end of its three-year life is $100,000. Annual cash operating revenues are $700,000, $600,000 and $550,000 in years 1, 2 and 3, and cash expenses (before interest) are $300,000, $250,000 and $200,000 respectively. The machine will be depreciated for tax purposes using straight-line depreciation of 25% per year. Assume a corporate tax rate of 30% (tax is paid in the year the income is earned)....

4) Machine A costs $35,000, lasts 3 years and has a salvage value of $7,500. Machine...

4) Machine A costs $35,000, lasts 3 years and has a salvage value of $7,500. Machine B costs $25,000, lasts 2 years and has a salvage value of $3,500. The machines can be purchased at the same price with the same salvage value in the future, and are needed for a 6 year project. Which machine would you purchase and why? Provide justification using an Annualized Equivalent Cost analysis. Interest is 10% annual rate, compounded annually. Answer______________________________________

A depreciable asset costs $10,000 and has an estimated salvage value of $1600 at the end...

A depreciable asset costs $10,000 and has an estimated salvage value of $1600 at the end of its 6-year depreciable life. Compute the depreciation schedule for this asset by both SOYD depreciation and DDB depreciation.

A machine costs Rs. 10,000 with useful life of 5 years. It has a salvage value...

A machine costs Rs. 10,000 with useful life of 5 years. It has a salvage value of Rs. 2,000 at the end of its useful life. The machine is expected to generate the following cash flows; Year Cash Flow (PKR) 1 5,000 2 6,000 3 8,000 4 6,500 5 4,000 Calculate Accounting Rate of Return? Tax is applied at 30% per annum. Why Accounting Rate of Return is not among the favorite methodology to evaluate a project? In what circumstances...

A machine costs $460,000, has a $36,000 salvage value, is expected to last eight years, and...

A machine costs $460,000, has a $36,000 salvage value, is expected to last eight years, and will generate an after-tax income of $100,000 per year after straight-line depreciation. Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) A new operating system for an existing machine is expected to...

A machine cost $30,000 initially and has no salvage value. The O&M costs in year 1...

A machine cost $30,000 initially and has no salvage value. The O&M costs in year 1 were $10,000 and have been increasing by $2,000 from year 2. The minimum cost life of this machine for a MARR of 10 %. (show your solution) A. 4 years B. 2 years C. 6 years D. None of above

An equipment costs Php 2,329,961. At the end of its economic life of 17 years, its...

An equipment costs Php 2,329,961. At the end of its economic life of 17 years, its salvage value is Php 60,758. Using Sum of the Years Digit Method of Depreciation, what will be its depreciation charge for year 8? MANUAL SOLUTIONS

Machine A has an initial cost of $19,500 and a salvage value of $7500 (today's value)...

Machine A has an initial cost of $19,500 and a salvage value of $7500 (today's value) at the end of its 12 year life. Machine B has an initial cost of $17,900 and a salvage value of $2300 (today's value) at the end of it's 6 year life. Inflation is 3.9% Don’t forget, we will need to increase the costs and salvage values by inflation for any transaction other than year 0. The company uses a MARR rate of 14% ...

A company invests in an equipment that costs $300k with $40k salvage value and will be...

A company invests in an equipment that costs $300k with $40k salvage value and will be depreciated over 8 years according to the DDB method. The equipment could generate revenues of $25k in the first year and increase by 5000$ every year thereafter. The operating and maintenance costs of the equipment are 1200$ in the first year and increase by 10% each year thereafter. The tax rate of the company Income is 32%. A. Develop the cash flow before tax...

Question