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? a. ₱540,000 b. ₱784,000 c. ₱719,000 d. ₱469,000 e. ₱531,500 f. ₱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? a. ₱540,000 b. ₱784,000 c. ₱719,000 d. ₱469,000 e. ₱531,500 f. ₱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?
a. ₱540,000 b. ₱784,000 c. ₱719,000
d. ₱469,000 e. ₱531,500 f. ₱406,500
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