Two units 1.0mVA capacity diesel engine generator set were purchased six years ago ata cost of P7,000,000. It was estimated to have a useful life of 10 years with a salvagevalue of P300,000 at the end of life. Due to the unusual operational problem, thecompany decided to replace the units and can be sold only for P800,000 per unit.Determine the sunk cost of the two units if depreciation has been computed by:Straight-line methoda. P1,380,000b. P1,450,000c. P1,350,000d. P1,507,000Sinking fund method at 12% interest ratea. P2,125,500b. P 3,109,237c. P2,634,210d. P3,541,023Double declining balance methoda. P253,800b. P235,008с. Р325,080d. P358,200Sum-of-the-year's digit methoda. P11,118b. P18,181с. Р88,118d. P81,818

The sunk cost is excess of book value over present realizable salvage value. Since, the multiple…

Answered: Two units 1.0mVA capacity diesel engine…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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An old machine that originally cost $9,500 thus far has accumulated depreciation of$1,900. The remaining useful life is four years, with no salvage value at the end of itsuseful life. A new machine is now available that costs $8,500, with a useful life of fiveyears and no residual value. The old machine could be sold now for $1,400. The annualcash operating costs for the old machine are $5,000, but for the new machine theywould be only $2,500. Gross revenue from the products would be $12,000 annually foreither machine. The company shouldA) keep the old machine to avoid a $6,200 loss on its disposal.B) replace the old machine.C) keep the old machine to avoid an $8,500 decrease in cash.D) keep the old machine to avoid a $1,400 loss on its disposal.
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