A firm is planning to replace an old machine that was acquired several years ago at a cost of ₱600,000. The machine has been depreciated to its salvage value of ₱60,000. A new machine can be purchased at ₱800,000, 2/10, n/30. The dealer will grant a trade-in allowance of ₱65,000 on the old machine. If the new machine is not purchased, the firm will spend ₱250,000 to repair the old machine. Gains on losses in trade-in transactions are not subject to income tax. The cost of repair to the old machine can be deducted in the first year for computing income tax. Income tax is 25% of the income subject to tax. The net cost of investment would be? ₱540,000 ₱784,000 ₱719,000 ₱469,000 ₱531,500 ₱406,500
A firm is planning to replace an old machine that was acquired several years ago at a cost of ₱600,000. The machine has been depreciated to its salvage value of ₱60,000. A new machine can be purchased at ₱800,000, 2/10, n/30. The dealer will grant a trade-in allowance of ₱65,000 on the old machine. If the new machine is not purchased, the firm will spend ₱250,000 to repair the old machine. Gains on losses in trade-in transactions are not subject to income tax. The cost of repair to the old machine can be deducted in the first year for computing income tax. Income tax is 25% of the income subject to tax. The net cost of investment would be? ₱540,000 ₱784,000 ₱719,000 ₱469,000 ₱531,500 ₱406,500
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A firm is planning to replace an old machine that was acquired several years ago at a cost of ₱600,000. The machine has been depreciated to its salvage value of ₱60,000. A new machine can be purchased at ₱800,000, 2/10, n/30. The dealer will grant a trade-in allowance of ₱65,000 on the old machine. If the new machine is not purchased, the firm will spend ₱250,000 to repair the old machine. Gains on losses in trade-in transactions are not subject to income tax. The cost of repair to the old machine can be deducted in the first year for computing income tax. Income tax is 25% of the income subject to tax. The net cost of investment would be?
₱540,000 ₱784,000 ₱719,000
₱469,000 ₱531,500 ₱406,500
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