# MCQs in Engineering Economics Part XVI

Compiled MCQs in Engineering Economics Part 16 of the series as one topic in General Engineering and Applied Sciences (GEAS) in the ECE Board Exam.

This is the Multiples Choice Questions Part 16 of the Series in Engineering Economics as one of the General Engineering and Applied Sciences (GEAS) topic. In Preparation for the ECE Board Exam make sure to expose yourself and familiarize in each and every questions compiled here taken from various sources including past Board Questions in General Engineering and Applied Sciences (GEAS), Engineering Economy Books, Journals and other Engineering Economy References.

### Online Questions and Answers in Engineering Economics Series

Following is the list of multiple choice questions in this brand new series:

Engineering Economics MCQs
PART 1: MCQs from Number 1 – 50                        Answer key: PART I
PART 2: MCQs from Number 51 – 100                   Answer key: PART II
PART 3: MCQs from Number 101 – 150                 Answer key: PART III
PART 4: MCQs from Number 151 – 200                 Answer key: PART IV
PART 5: MCQs from Number 201 – 250                 Answer key: PART V
PART 6: MCQs from Number 251 – 300                 Answer key: PART VI
PART 7: MCQs from Number 301 – 350                 Answer key: PART VII
PART 8: MCQs from Number 351 – 400                 Answer key: PART VIII
PART 9: MCQs from Number 401 – 450                 Answer key: PART IX
PART 16: MCQs from Number 751 – 800                 Answer key: PART XVI

### Continue Practice Exam Test Questions Part XVI of the Series

Choose the letter of the best answer in each questions.

751. The recorded current value of an asset is known as:

• A. Scrap value
• B. Salvage value
• C. Book value
• D. Present worth

752. Scrap value of an asset is sometimes known as:

• A. Book value
• B. Salvage value
• C. Replacement value
• D. Future value

753. What is sometimes called second-hand value?

• A. Scrap value
• B. Salvage value
• C. Book value
• D. Going value

754. An intangible value which is actually operating concern has due to its operation.

• A. Book value
• B. Fair value
• C. Goodwill value
• D. Going value

755. A company issued 50 bonds of P1,000.00 face value each, redeemable at par at the end of 15 years. To accumulate the funds required for redemption the firm established a sinking fund consisting of annual deposits, the interest rate of the fund being 4%. What was the principal in the fund at the end of the 12th year?

• A. P37,002.54
• B. P37,520.34
• C. P38,010.23
• D. P38,782.34

756. A local firm is establishing a sinking fund for the purpose of accumulating a sufficient capital to retire its outstanding bonds at maturity. The bonds are redeemable in 10 years and their maturity value is P150,000.00. How much should be deposited each year if the fund pays interest at the rate of 3%?

• A. P13,084.58
• B. P13,048.85
• C. P13,408.58
• D. P13,480.58

757. A P1,000,000 issue of 3%, 15-year bond was sold at 95%. What is the rate of interest of this investment?

• A. 3.0%
• B. 3.4%
• C. 3.7%
• D. 4.0%

758. A man was offered a Land Bank certificate with a face value of P100,000 which is bearing interest of 6% per year payable semiannually and due in 6 years. If he wants to earn 8% semiannually, how much must he pay the certificate?

• A. P90,123.09
• B. P90,614.93
• C. P90,590.12
• D. P90,333.25

759. A P1,000 bond which will mature in 10 years and with a bond rate of 8% payable annually is to be redeemed at par at the end of this period. It is sold at P1,030. Determine the yield at this price.

• A. 7.56%
• B. 7.65%
• C. 7.75%
• D. 7.86%

760. You purchase a bond at P5,100. The bond pays P200 per year. It is redeemable for P5,050 at the end of 10 years. What is the net rate of interest on your investment?

• A. 3.56%
• B. 3.85%
• C. 3.75%
• D. 3.68%

761. A P1,000, 6% bond pays dividend semiannually and will be redeemed at 110% on June 21, 2004. It is bought on June 21, 2001 to yield 4% interest. Find the price of the bond.

• A. P1,122.70
• B. P1,144.81
• C. P1,133.78
• D. P1,155.06

762. The value which a disinterested third party, different from the buyer and seller, will determine in order to establish a price acceptable to both parties.

• A. Market value
• B. Goodwill value
• C. Fair value
• D. Franchise value

763. A type of annuity where the payments are made at the end of each payment period starting from the first period.

• A. Ordinary annuity
• B. Annuity due
• C. Deferred annuity
• D. Perpetuity

764. It is a series of equal payments occurring at equal intervals of time where the first payment is made after several periods, after the beginning of the payment.

• A. Deferred annuity
• B. Delayed annuity
• C. Progressive annuity
• D. Simple annuity

765. A type of annuity where the payments are made at the start of each period, beginning from the first period.

• A. Ordinary annuity
• B. Annuity due
• C. Deferred annuity
• D. Perpetuity

766. Which is NOT an essential element of an ordinary annuity?

• A. The amounts of all payments are equal.
• B. The payments are made at equal interval of time.
• C. The first payment is made at the beginning of each period.
• D. Compound interest is paid on all amounts in the annuity.

767. A is a periodic payment and I is the interest rate, then present worth of a perpetuity =

• A. Ai
• B. Ain
• C. An/i
• D. A/i

768. A mathematical expression also known as the present value of an annuity of 1 is called

• B. Demand factor
• C. Sinking fund factor
• D. Present worth factor

769. As applied to a capitalized asset, the distribution of the initial cost by a periodic changes to operation as in depreciation or the reduction of a debt by either periodic or irregular prearranged program is called

• A. Annuity
• B. Capital recovery
• C. Annuity factor
• D. Amortization

770. The reduction of the value of an asset due to constant use and passage of time.

• A. Scrap value
• B. Depletion
• C. Depreciation
• D. Book value

771. A method of computing depreciation in which the annual charge is a fixed percentage of the depreciated book value at the beginning of the year which the depreciation applies.

• A. Straight line method
• B. Sinking fund method
• C. SYD method
• D. Declining balance method

772. 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 obsolescence, what will be its selling price after 5 years?

• A. P222.67
• B. P212.90
• C. P236.20
• D. P231.56

773. A machine costs P8,000 and an estimated life of 10 years with a salvage value of P500. What is its book value after 8 years using straight line method?

• A. P2,000.00
• B. P2,100.00
• C. P2,200.00
• D. P2,300.00

774. A telephone company purchased a microwave radio equipment for P6 million, freight and installation charges amounted to 4% of the purchased price. If the equipment will be depreciated over a period of 10 years with a salvage value of 8%, determine the depreciation cost during the 5th year using SYD.

• A. P626,269.09
• B. P623,209.09
• C. P625,129.09
• D. P624,069.89

775. ABC Corporation makes it a policy that for any new equipment purchased, the annual depreciation cost should not exceed 20% of the first cost at any time with no salvage value. Determine the length of service life necessary if the depreciation used is the SYD method.

• A. 7 years
• B. 8 years
• C. 9 years
• D. 10 years

776. A company purchases an asset for P10,000.00 and plans to keep it for 20 years. If the salvage value is zero at the end of the 20th year, what is the depreciation in the third year? Use SYD method.

• A. P857.14
• B. P862.19
• C. P871.11
• D. P880.00

777. An asset is purchased for P500,000.00. The salvage value in 25 years is P100,000.00. What is the total depreciation in the first three years using straight-line method?

• A. P45,000.00
• B. P46,000.00
• C. P47,000.00
• D. P48,000.00

778. A machine has an initial cost of P50,000 and a salvage value of P10,000 after 10 years. What is the book value after 5 years using straight line depreciation?

• A. P30,000.00
• B. P31,000.00
• C. P30,500.00
• D. P31,500.00

779. An asset is purchased for P9,000.00. Its estimated life is 10 years after which it will be sold for P1,000.00. Find the book value during the first year if SYD depreciation is used.

• A. P7,545.45
• B. P7,320.11
• C. P7,490.00
• D. P7,690.12

780. The cost of equipment is P500,000 and the cost of installation is P30,000. If the salvage value is 10% of the cost of equipment at the end of years, determine the book value at the end of the fourth year. Use straight-line method.

• A. P146,320.50
• B. P146,000.00
• C. P146,230.50
• D. P146,023.50

781. An asset is purchased for P20,000.00. Its estimated life is 10 years after which it will be sold for P12,000.00. Find the depreciation for the first year using SYD method.

• A. P1,545.45
• B. P1,454.54
• C. P1,344.21
• D. P1,245.45

782. A machine has an initial cost of P50,000 and a salvage value of P10,000 after 10 years. Find the book value after 5 years using straight-line depreciation.

• A. P31,000.00
• B. P31,500.00
• C. P30,000.00
• D. P30,500.00

783. A machine has an initial cost of P50,000.00 and a salvage value of P10,000.00 after 10 years. What is the straight line method depreciation rate as a percentage of the initial cost?

• A. 10%
• B. 8%
• C. 7%
• D. 9%

784. A machine costing P45,000 is estimated to have a book value of P4,350 when retired at the end of 6 years. Depreciation cost is computed using a constant percentage of the declining book value. What is the annual rate of depreciation in %?

• A. 32.50%
• B. 32.25%
• C. 32.00%
• D. 32.75%

785. An asset is purchased for P120,000.00. Its estimated life is 10 years, after which it will be sold for P12,000.00. Find the depreciation for the second year using the sum-of-years’ digit method.

• A. P17,578.13
• B. P17,412.43
• C. P17,344.67
• D. P17,672.73

786. A machine costing P720,000 is estimated to have a book value of P40,545.73 when retired at the end of 10 years. Depreciation cost is computed using a constant percentage of the declining book value. What is the annual rate of depreciation in %?

• A. 25%
• B. 26%
• C. 27%
• D. 28%

787. An asset is purchased for P9,000.00. Its estimated economic life is 10 years after which it will be sold for P1,000.00. Find the depreciation in the first three years using straight line method.

• A. P2,400.00
• B. P2,412.34
• C. P2,250.00
• D. P2,450.00

788. An engineer bought an equipment for P500,000. He spent an additional amount of P30,000 for installation and other expenses. The estimated useful life of the equipment is 10 years. The salvage value is x% of the first cost. Using the straight line method of depreciation, the book value at the end of 5 years will be P291,500. What is the value of x?

• A. 0.2
• B. 0.4
• C. 0.3
• D. 0.1

789. The initial cost of a paint sand mill, including its installation, is P800,000. The BIR approved life of this machine is 10 years for depreciation. The estimated salvage value of the mill is P50,000 and the cost of dismantling is estimated to be P15,000. Using straight-line depreciation, what is the annual depreciation charge?

• A. P75,500.00
• B. P76,000.00
• C. P76,500.00
• D. P77,000.00

790. The initial cost of a paint sand mill, including its installation, is P800,000. The BIR approved life of this machine is 10 years for depreciation. The estimated salvage value of the mill is P50,000 and the cost of dismantling is estimated to be P15,000. Using straight-line depreciation, what is the book value of the machine at the end of six years?

• A. P341,000.00
• B. P343,000.00
• C. P340,000.00
• D. P342,000.00

791. A unit of welding machine cost P45,000 with an estimated life of 5 years. Its salvage value is P2,500. Find its depreciation rate by straight-line method.

• A. 18.89%
• B. 19.21%
• C. 19.58%
• D. 19.89%

792. A tax and duty free importation of a 30 hp sandmill for paint manufacturing cost P360,000.00. Bank charges arrastre and brokerage cost P5,000.00. Foundation and installation costs were P25,000.00. Other incidental expenses amount to P20,000.00. Salvage value of the mill is estimated to be P60,000 after 20 years. Find the appraisal value of the mill using straight line depreciation at the end of 10 years.

• A. P234,000.00
• B. P235,000.00
• C. P234,500.00
• D. P235,500.00

793. An equipment costs P10,000 with a salvage value of P500 at the end of 10 years. Calculate the annual depreciation cost by sinking-fund method at 4% interest.

• A. P791.26
• B. P792.61
• C. P726.17
• D. P771.26

794. A machine initially worth P50,000 depreciates in value each year by 20% of its value at the beginning of that year. Find its book value when it is 9 years old.

• A. P6,710.89
• B. P6,400.89
• C. P6,666.89
• D. P6,512.78

795. A consortium of international telecommunications companies contracted for the purchase and installation of fiber optic cable linking Manila City and Cebu City at a total cost of P960 million. This amount includes freight and installation charges estimated at 10% of the above total contract price. If the cable shall be depreciated over a period of 15 years with zero salvage value and money is worth 6% per annum, what is the annual depreciation charge?

• A. P41,044,903.40
• B. P41,211,158.40
• C. P41,254,000.40
• D. P41,244,253.40

796. An asset is purchased for P9,000.00. Its estimated economic life is 10 years after which it will be sold for P1,000.00. Find the depreciation in the first three years using sum-of-years’ digit method.

• A. P3,279.27
• B. P3,927.27
• C. P3,729.27
• D. P3,792.72

797. A radio service panel truck initially cost P560,000. Its resale value at the end of the 5th year of the useful life is estimated at P150,000. By means of declining balance method, determine the depreciation charge for the second year.

• A. P99,658.41
• B. P99,128.45
• C. P99,290.00
• D. P99,378.45

798. Shell Philippines, a multinational company, has a total gross income for a particular year of P50,000,000. The taxable income after taking all deductions except for depletion is P18,500,000. What is the allowable depletion allowance for that particular year? Take percentage of gross income for oil as 22%.

• A. P9,358.41
• B. P9,228.45
• C. P9,250.00
• D. P9,308.45

799. The Saudi Arabian Oil Refinery developed an oil well which is estimated to contain 5,000,000 barrels of oil at an initial cost of \$50,000,000. What is the depletion charge during the year where it produces half-million barrels of oil? Use Unit or Factor method in computing depletion.

• A. \$500,000,000
• B. \$510,000,000
• C. \$525,000,000
• D. \$550,000,000

800. The first cost of a certain equipment is P324,000 and a salvage value of P50,000 at the end of its life of 4 years. If money is worth 6% compounded annually, find the capitalized cost.

• A. P540,090.34
• B. P541,033.66
• C. P540,589.12
• D. P541,320.99

### Complete List of MCQs in General Engineering and Applied Science per topic

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