Multiple choice: Araneta Forwarders, Inc. is planning to purchase a new delivery vehicle costing P500,000. Test run expenses amount to P50,000. The old vehicle which will be replaced will have a trade-in value of P200,000. Other assets that are to be retired as a result of the acquisition of the new vehicle can be salvaged and sold for P130,000. The retirement of these other assets will result to a gain of P10,000 which will increase income taxes by P3,200. If the new vehicle is not purchased, extensive repairs on the old vehicle will have to be made at an estimated cost of P12,000. If the new vehicle will be purchased, a set of refrigeration cooling system with a market value of P100,000 will have to be installed to make the new vehicle operational. The refrigeration cooling system is currently idle. As well, additional gross working capital of P24,000 will be needed to support operations planned with the new vehicle. How much is the total cost and/or cash outflows to be assigned to the new vehicle for purposes of computing the net investment? • P674,000 • P500,000 • P339,040 • P550,000
Multiple choice:
Araneta Forwarders, Inc. is planning to purchase a new delivery vehicle costing P500,000. Test run expenses amount to P50,000. The old vehicle which will be replaced will have a trade-in value of P200,000. Other assets that are to be retired as a result of the acquisition of the new vehicle can be salvaged and sold for P130,000. The retirement of these other assets will result to a gain of P10,000 which will increase income taxes by P3,200. If the new vehicle is not purchased, extensive repairs on the old vehicle will have to be made at an estimated cost of P12,000. If the new vehicle will be purchased, a set of refrigeration cooling system with a market value of P100,000 will have to be installed to make the new vehicle operational. The refrigeration cooling system is currently idle. As well, additional gross
• P674,000
• P500,000
• P339,040
• P550,000
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