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    Engg522 Quiz 2

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    H M
    The document contains 5 multiple choice questions related to engineering economy and financial concepts. Question 1 asks about the difference between stocks and bonds. Question 2 asks which type of business ownership someone would choose and why if starting a new venture. Question 3 provides details of an electronic balance and asks to calculate its book value after 3 years using straight-line depreciation. Question 4 gives information about machinery purchased by a television company and asks to calculate its depreciation using the service output method. Question 5 provides details of an equipment purchase and asks to calculate its annual depreciation and book value after 5 years using different depreciation methods.

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    Engg522 Quiz 2

    Uploaded by

    H M
    46 views3 pages
    The document contains 5 multiple choice questions related to engineering economy and financial concepts. Question 1 asks about the difference between stocks and bonds. Question 2 asks which type of business ownership someone would choose and why if starting a new venture. Question 3 provides details of an electronic balance and asks to calculate its book value after 3 years using straight-line depreciation. Question 4 gives information about machinery purchased by a television company and asks to calculate its depreciation using the service output method. Question 5 provides details of an equipment purchase and asks to calculate its annual depreciation and book value after 5 years using different depreciation methods.

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    The document contains 5 multiple choice questions related to engineering economy and financial concepts. Question 1 asks about the difference between stocks and bonds. Question 2 asks which type of business ownership someone would choose and why if starting a new venture. Question 3 provides details of an electronic balance and asks to calculate its book value after 3 years using straight-line depreciation. Question 4 gives information about machinery purchased by a television company and asks to calculate its depreciation using the service output method. Question 5 provides details of an equipment purchase and asks to calculate its annual depreciation and book value after 5 years using different depreciation methods.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    46 views3 pages

    Engg522 Quiz 2

    Uploaded by

    H M
    The document contains 5 multiple choice questions related to engineering economy and financial concepts. Question 1 asks about the difference between stocks and bonds. Question 2 asks which type of business ownership someone would choose and why if starting a new venture. Question 3 provides details of an electronic balance and asks to calculate its book value after 3 years using straight-line depreciation. Question 4 gives information about machinery purchased by a television company and asks to calculate its depreciation using the service output method. Question 5 provides details of an equipment purchase and asks to calculate its annual depreciation and book value after 5 years using different depreciation methods.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    ENGG522 ENGINEERING ECONOMY

    QUIZ 2
    PART 1.

    1. State the difference between stocks and bonds [5]

    The difference between stocks and bonds is that stocks are shares in the ownership of a
    business, while bonds are a form of debt that the issuing entity promises to repay at some
    point in the future. ... This means that stocks are a riskier investment than bonds. Periodic
    payments

    2. If you are to venture a business, which type of ownership would you like to take? Why?[5]

    Sole proprietorship

    A sole proprietorship occurs when someone does business activities but doesn’t register as
    another kind of business. There is no separate business entity, meaning there is no distinction
    between the business owner’s personal and professional assets and liabilities.

    Sole proprietorships are simple, easy to start, and one of the most common types of business
    ownership. They are a good option for someone starting a low-risk business on a trial basis.
    Also, no additional taxation!

    However, because there is no formal separation, the business owner will become personally
    liable for any obligation the business might have.

    PART 2.

    3. An electronic balance costs BD12,000 and has an estimated salvage value of


    BD1000 at the end of its 8 years life. What would be the book value after three years
    using the straight line method of solving for the depreciation? [10]

    Question 3) Following is Given -:


    Initial Cost = BD 12,000
    Salvage Value = BD 1000
    Useful Life = 8 years
    Straight line Dpericiation = ( Initial Cost - Salvage Value ) / Useful Life
    = ( 12,000 - 1000 ) / 8
    = 11,000 / 8
    Straight line Dpericiation = BD 1,375
    Straight-line depreciation remains constant for all the years, so
    So Accumulated Depreciation till year 3 = Straight-line Depreciation * 3
    = BD 1,375 * 3
    Accumulated Depreciation till year 3  = BD 4,125
    Book Value After three year = Initial Cost - Accumulated Depreciation till year 3  
    = BD 12,000 - BD 4,125
    Book Value After three year   = BD 7,875

    4. A television company purchased machinery for BD 15,000 in 2009 and a salvage


    value of BD 3500 after 7 years. It is estimated to produce a maximum
    production of 14,000 units in a span of 7 years. In 2010 it has produce a total of
    3,000 units. Find the depreciation using the service output method. [10]

    Question 4) Following is Given -:


    Cost of Machinery in 2009 = BD 15,000
    Salvage Value = BD 3500
    Useful life = 7 years
    Estimated to produce 14,000 units in 7 years
    Depriciation per unit for machinery = ( Initial Cost - Salvage Value ) / Estimated number of
    units to produce in 7 years
    = ( 15,000 - 3500 ) / 14,000
    = 11,500 / 14,000
    Depriciation per unit for machinery = BD 0.8214285714285714 per unit.
    Production in 2010 = 3000 unitsDepreciation for machinery in the
    Depreciation for machinery in the year 2010 =  Depreciation per unit for machinery *
    Production in 2010
    = BD 0.8214285714285714 * 3000
    Depreciation for machinery in the year 2010 = BD 2,464.28571428

    5. A broadcasting corporation purchased an equipment for BD7,300 and paid.


    The equipment has a useful life of 4 years with a trade value of BD800 against the
    purchase of a new equipment at the end of the life. Compute the annual
    depreciation value and the resulting book value at the end of 5 years using:
    (Make a depreciation schedule using microsoft excel)

    a) DDB [10 marks]

    b) Sinking fund method at 10% interest [10 marks]

    c) Sum of the years digit method [10 marks]

    Since this asset has 5 years' life, the straight line depreciation rate would be 1/5 = 20%.
    In DDB, we use 2*20% = 40% and apply it on the book value of the asset. Hence
    this is what we get 412.13 as the BV at teh end of 5 years
    Depreciation 40% on Closing BV = Opening
    Year Opening BV
    Opening BV BV - Depreciation

    1            5,300.00            2,120.00      3,180.00

    2            3,180.00            1,272.00      1,908.00

    3            1,908.00               763.20      1,144.80

    4            1,144.80               457.92         686.88

    5               686.88               274.75         412.13

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