Answered: semiannual payments must be set aside…

semiannual payments must be set aside into a sinking fund to replace the equipment in eight years if the interest rate is 4%

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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Question

3. A computer equipment has an original cost of F650,000 with
za scrap value of P50,000 at the end of eight years. What
semiannual payments must be set aside into a sinking fund to
replace the equipment in eight years if the interest rate is 4%
compounded semiannually? Assume a 2% inflation rate.

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Step 1 Calculation of net amount required to replace the equipment:

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