1. Write a short notes on Life Cycle cost.

2. A person wishes to have a future sum of Rs.1, 00,000 for his son’s education after 10 years
from now. What is the single-payment that he should deposit now so that he gets the desired
amount after 10 years? The bank gives 15% interest rate compounded annually.
3. Derive the Equal-Payment Series Sinking Fund Factor.
4. Write a short note on incremental cost.
5. Twenty years ago, when Indian Railways started building electric locomotives of 1,000 HP
capacity, the cost per locomotive was Rs.2 million and price index for locomotive inputs was
120. Now the price index for inputs has increased to 360. Indian Railway plans to manufacture
electric locomotives of 4,000 HP. The power sizing factor is 0.80. Estimate the cost of each
locomotive.
6. What is the present value of an annuity of Rs. 8000 starting at the end of 7th year, lasting for 7
years at an effective interest rate of 10%?
7. Define sunk cost and opportunity cost with example.
8. An operation has a 90% learning curve and the first unit produced took 28 minutes. The labour
cost is $20 per hour.
a) How long will the second unit take?
b) How much should the second unit cost?
9. Define Fixed and Variable Cost. What are the differences between the two costs?
10. (i) Define NPV. What are the differences between NPV and IRR
(ii) You deposit 500 in a credit union at the end of each year for 5 years. The credit union pays
5% interest, compounded annually. Immediately after the fifth deposit, how much can you
withdraw from your account?
11. (i) Suppose the bank changed the interest policy to 6% compounded quarterly. For this
situation, how much money would be in the account at the end of 3 years assuming a Rs. 500
deposited now?
(ii) A person deposits a sum of Rs. 20,000 at the interest rate of 18% compounded annually for
10 years. Find the maturity value after 10 years.
12. (i) What do you understand by “Time value of money”?
(ii) An aqua duct is needed to bring water into the city. It can build at a reduced size now for 3
lakhs and enlarged 25 years later at Rs.3.5 lakhs. The other option is to construct the full size
aqua duct for Rs. 4 lakhs. Use present worth to find the better choice.
13. Describe the methods of cost estimation.
14. (i) A certain index for the cost of purchasing and installing utility boilers is keyed to 1988,
where its baseline value was arbitrarily set at 100. Company XYZ installed a 50,000 lb/hour
boiler for $525,000 in 2000 when the index had a value of 468. This same company must install
another boiler of the same size in 2007. The index in 2007 is 542. What is the approximate cost
of new boiler?
(ii) A company wants to set up a reserve which will help it to have an annual amount equivalent
to Rs.1, 00,000 for every year for the next 20 years. Find the single payment that has to be made
now. [Given i= 15% ]
15. Explain the process of decision making.
16. Distinguish between recurring & non-recurring cost and Cash cost & Book cost with
example.
17. What is simple interest? Do you think it is beneficial than compound interest?
18. What is nominal and effective interest? How can you relate these two interests?
19. Define Average and Marginal cost. Write down the differences between these two costs.
20. Describe per unit model and segmentation model.
21. Discuss the steps in decision making process.
22. Discuss the economic problems faced by an engineer with suitable examples.
23. (i) A person wants to buy some electronic equipment for Rs. 1000. He has decided to save a
uniform amount at the end of each month so that he will have the required $1,000 at the end of
one year. The local credit union pays 6% interest, compounded monthly. How much does he
have to deposit each month?
(ii) Suppose that an aircraft manufacturer desires to make a preliminary estimate of the cost of
building a 600-MW fossil fuel plant for the assembly of its new long distance aircraft. It is
known that a 200-MW plant costs $100 million 20 years ago when the approximated cost index
was 400 and the cost index is now 1200. The cost capacity factor for a fossil fuel power plant is
0.79.
24. What is the role of engineering economic analysis?
25. (i) A person invests a sum of Rs.5,000 in a bank at a nominal interest rate of 10% for 2 years.
The compounding is quarterly. Find the maturity amount of the deposit after 2 years.
(ii) Two alternatives are under consideration for a tapered fastening pin. Either design will serve
the purpose and will involve the same material and manufacturing cost except for the lathe and
grinder operations. Design A will require 16 hours of lathe time and 4.5 hours of grinder time per
1,000 units. Design B will require 7 hours of lathe time and 12 hours of grinder time per 1,000
units. The operating cost of the lathe including labour is Rs. 200 per hour. The operating cost of
the grinder including labour is Rs. 150 per hour. Which design should be adopted if 1,00,000
units are required per year and what is the economic advantage of the best alternative?
26. Write a short note on life cycle cost with diagram.
27. What are the types of cost estimation? Explain each type in detail.
28. An energy efficient machine costs Rs.5, 000 and has a life of 5 years. If the interest rate is
8%, how much must be saved every year to recover the cost of the capital invested in it?
29. What are the differences between recurring and non-recurring cost?
30. What do you understand by P/V ratio and Margin of safety?
31. What do you mean by `Make or Buy Decisions?
32. What is revenue dominated cash flow?
33. Discuss Break Even Analysis with diagram.
34.(i) Find the Equal Annual worth (EAW)
Initial Cost: Rs. 40,000
Salvage Value: Rs. 5,000
Revenue/Year : Rs.10,000
Life: 10, years
i= 15%
(ii) Define Cash Cost and Book Cost
35. Based on the following information calculate NPV:-
a) Initial Investment : Rs. 30,000
b) Cost of Capital: 10%
c) Quantity manufactured and sold annually: 1,400
d) Price per unit : Rs.30
e) Variable Cost/unit :Rs.20
f) Fixed Cost :Rs.3,000
g) Depreciation : Rs.2,000
h) Tax Rate : 50%
i) Life of the project : 5 yrs
36. A diesel manufacturer is considering the two alternative production machines. Specific data
are as follows:
Particulars Alternative 1 Alternative 2

Initial Cost $50,000 $75,000

Estimated $10,000 $12,000

salvage value
at end of useful
life

Useful life of 7 13
equipment in
years

The manufacturer uses an interest rate of 8% and wants to use the present worth method to
compare their alternatives over an analysis period of 10 years. The estimated market value at the
end of 10-year analysis period is $20,000 and $15,000 for Alt1 and Alt2 respectively.
37. Find the better choice by using future worth [ Given i=12% ]:

Machine Initial Cost Return/year Life

A 40L 8L 4 yrs

B 45L 10L 4 yrs

38. A firm is trying to decide which of two weighing scales it should install to check a package-
filling operation in the plant. The ideal scale would allow better control of the filling operation,
hence less overfilling. If both scales have lives equal to the six year analysis period, which one
should be selected?
Assume an 8% interest rate.

Alternatives Cost Uniform End-of-

Useful
Annual
Benefit life
salvage
value

Atlas Scale Rs.2000 Rs.450 Rs.100

Tom Rs.3000 Rs.600 Rs.700

Thumb
Scale

39. (i) Discuss the cost estimating models.

(ii) What are the difficulties in cost estimation?
40. The cost of erecting an oil well is Rs. 1, 50, 00,000. The annual equivalent yield from the oil
well is Rs. 30, 00,000. The salvage value after its useful life of 10 years is Rs. 2, 00,000.
Assuming an interest rate of 18%, compounded annually, find out whether the erection of the oil
well is financially feasible, based on the present worth method.
41. Two alternatives are being considered for improving an operation on the assembly line along
with the “do-nothing” alternative. Equipment costs vary, as do the annual benefits of each in
comparison to the present situation. Each of plans A and B has a 10 year life and a salvage value
equal to 10% of its original cost.

Particulars Plan A Plan B

Installed Cost $ 15,000 $33,000

of Equipment

Material & $ 14,000 $14,000

Labour
savings / year

Annual $8,000 $6,000

Operating
Expense

If interest rate is 8%, which plan, if any, should be adopted?

42. The chief engineer of refinery operations is not satisfied with the preliminary design for
storage tanks to be used as part of a plant expansion programme. The engineer who submitted
the design was called in and asked to reconsider the overall dimensions in the light of an article
in the Chemical Engineer, entitled “How to size future process vessels?”
The original design submitted called for 4 tanks 5.2 m in diameter and 7 m in height. From a
graph of the article, the engineer found that the present ratio of height to diameter of 1.35 is
111% of the minimum cost and that the minimum cost for a tank was when the ratio of height to
diameter was 4 : 1. The cost for the tank design as originally submitted was estimated to be Rs.
9,00,000. What are the optimum tank dimensions if the volume remains the same as for the
original design? What total savings may be expected through the redesign?
43. Explain the steps in the process planning.
44. Write a short notes on Cash Flow diagram (give an example).
45. Write down the differences between NPV and IRR.
46. (i) What are the differences between Inflation and Deflation.
(ii) In your opinion which one is better between Inflation and Deflation?
47. A granite company is planning to buy a fully automated granite cutting machine. If it is
purchased under down payment, the cost of the machine is Rs. 16,00,000. If it is purchased under
installment basis, the company has to pay 25% of the cost at the time of purchase and the
remaining amount in 10 annual equal installments of Rs. 2,00,000 each. Suggest the best
alternative for the company using the present worth basis at i = 18%, compounded annually.
48. A company has to replace a present facility after 15 years at an outlay of Rs. 5,00,000. It
plans to deposit an equal amount at the end of every year for the next 15 years at an interest rate
of 18% compounded annually. Find the equivalent amount that must be deposited at the end of
every year for the next 15 years.
49. What is annual equivalent method?
50. What is Replacement analysis?
51. What are the limitations of cash flow analysis?
52. Determine the future worth method by assuming interest rate of 10%, for the given diagram.
Add your comment.
53. Explain in detail about future worth method ( Revenue dominated cash flow diagram)
54. Consider the following data of a company for the year 1997:
Sales = Rs. 1,20,000
Fixed cost = Rs. 25,000
Variable cost = Rs. 45,000
Find the following:
(a) Contribution
(b) Profit
(c) BEP
(d) M.S.

55. A finance company advertises two investment plans. In plan 1, the company pays Rs. 12,000
after 15 years for every Rs. 1,000 invested now. In plan 2, for every Rs. 1,000 invested, the
company pays Rs. 4,000 at the end of the 10th year and Rs. 4,000 at the end of 15th year. Select
the best investment plan from the investor’s point of view at i = 12%, compounded annually.
56. A company is planning to expand its business after 5 years from now. The money required
for the expansion programme is Rs. 4,00,00,000. What annual equivalent amount should the
company deposit at the end of every year at an interest rate of 15% compounded annually to get
Rs. 4,00,00,000 after 5 years from now?
57. A finance company advertises two investment plans. In plan 1, the company pays Rs. 12,000
after 15 years for every Rs. 1,000 invested now. In plan 2, for every Rs. 1,000 invested, the
company pays Rs. 4,000 at the end of the 10th year and Rs. 4,000 at the end of 15th year. Select
the best investment plan from the investor’s point of view at i = 12%, compounded annually.
58. Show with an example how future worth method can be applied to evaluate a cash flow.
59. Consider the following data of a company for the year 2018:
Sales = Rs. 80,000; Fixed cost = Rs. 15,000;
Variable cost = 35,000; Find the following:
(a) Contribution (b) Profit (c) BEP (d) M.S.
60. Distinguish between technical efficiency and economic efficiency by giving examples.
61. What is future worth analysis?
62. What is annual equivalent method?
63. Write five reasons for providing depreciation.
64. What is sinking fund?
65. Explain concept of discounting

66. Krishna Company Ltd has the following details:

Fixed Cost: Rs.40,00,000; Variable Cost per unit:Rs.300; Selling price per unit : Rs.500
Find :
a) The break-even sales quantity
b) The break-even sales
c) If the actual production quantity is 1,20,000; find the following:
i) Contribution
ii) Margin of safety

67. The expected cash flow of a project are as follows:

Year Cash Flow

0 -80,000
1 20,000

2 30,000

3 40,000

4 50,000

The cost of capital is 12%. Calculate the following:

a) NPV
b)benefit-cost ratio
c) Pay-back period

68. The scientists at spectrum have come up with an electric moped. The firm is ready for pilot
production and test marketing. This will cost Rs. 20 million and take six months. Management
believes that there is a 70% chance that the pilot production and test marketing will be
successful. In case of success, spectrum can build a plant costing Rs. 150 million. The plant will
generate a annual cash inflow of Rs. 30 million for 20 years if the demand is high or an annual
cash inflow of Rs.20 million if the demand is low. High demand has a probability of 0.6, low
demand has a probability of 0.4. Suggest the optimal course of action using decision tree
analysis. Assume a 12% interest rate compounded annually.
69. Two mutually exclusive projects are being considered for investment. Project A1 requires an
initial outlay of Rs. 30,00,000 with net receipts estimated as Rs. 9,00,000 per year for the next 5
years. The initial outlay for the project A2 is Rs. 60,00,000, and net receipts have been estimated
at Rs. 15,00,000 per year for the next seven years. There is no salvage value associated with
either of the projects. Using the benefit cost ratio, which project would you select? Assume an
interest rate of 10%.
70. The Alpha Drug Company has just purchased a capsulating machine for Rs. 20,00,000. The
plant engineer estimates that the machine has a useful life of five years and a salvage value of
Rs. 25,000 at the end of its useful life. Compute the depreciation schedule for the machine by
straight line and diminishing balance depreciation methods.
71. (i) Define inflation.
(ii) Discuss the impact of inflation on investment decision.
72. What are the ways by which the economic efficiency can be improved?
73. Jothi Lakshimi has arranged to buy some home recording equipment. She estimates that it
will have a five year useful life and no salvage value at the end of equipment life. The dealer,
who is a friend has offered Jothi Lakshimi two alternative ways to pay for the equipment.
(a) Pay Rs. 60,000 immediately and Rs. 15,000 at the end of one year.
(b) Pay nothing until the end of fourth year when a single payment of Rs. 90,000 must be made.
If Jothi Lakshimi believes 12% is a suitable interest rate, which alternative is the best for her?
74. An automobile dealer has recently advertised for its new car. There are three alternatives of
purchasing the car which are explained below.
Alternative 1 The customer can take delivery of a car after making a down payment of Rs.
25,000. The remaining money should be paid in 36 equal monthly installments of Rs. 10,000
each.
Alternative 2 The customer can take delivery of the car after making a down payment of Rs.
1,00,000. The remaining money should be paid in 36 equal monthly installments of Rs. 7,000
each.
Alternative 3 The customer can take delivery of the car by making full payment of Rs. 3,00,000.
Suggest the best alternative of buying the cars for the customers by assuming an interest rate of
20% compounded annually. Use the annual equivalent method.
75. A company invests in one of the two mutually exclusive alternatives. The life of both
alternatives is estimated to be 5 years with the following investment, annual returns & salvage
values.

Alternative

A B

Investment(Rs) -1,50,000 -1,75,000

Annual equal 60,000 70,000

return (Rs)

Salvage value 15,000 35,000

(Rs)

Determine the best alternative based on the annual equivalent method by assuming i=25%.

76. Classify cost dominated cash flow diagram to derive the Annual Equivalent Method.
77. A vehicle purchased at a cost of Rs.17, 000 depreciates over 5 years and will have a salvage
value of Rs.2000. Determine the annual depreciation of the vehicle under Straight Line Method
and its book value at the end of 3rd year.
78. Define depreciation and discuss the causes of depreciation.
79. Distinguish between Straight line and Declining Balance Method of depreciation.
80. A firm’s current asset and current liability are 1,600 and 1,000 respectively. How much can it
borrow on a short term basis without reducing the current ratio below 1.25?
81. Post the following entries:
a) Prepaid Insurance : Rs. 2,000
b) Accrued Interest on Investment: Rs. 1,000
c) Closing Stock : Rs. 10, 000
d) Land and Building: Rs. 5,00,000
e) Depreciation on Land and Building : Rs. 20,000
82. Determine the sales of a firm given the following information:
Current ratio= 1.4
Acid-test ratio = 1.2
Current Liabilities = 1,600
Inventory turnover ratio =8
83. A company is planning to start an employee welfare fund .It needs Rs. 50,00,000 during the
first year and it increases by Rs.5,00,000 every year thereafter up to the end of the 5th year. The
above figures are in terms of today rupee value. The annual average rate of inflation is 6% for
the next five years. The interest rate is 18%, compounded annually. Find the single deposit which
will provide the required series of fund towards employee’s welfare scheme after taking the
inflation rate into account.
84. Discuss the role of accounting.
85. Prepare Trading and Profit and Loss account and Balance Sheet of RKS Enterprises after
taking into account the adjustments:
Capital 300,000; Drawings 50,000 ; Purchases 400,000; Sales 600,000; Carriage Inwards 5,000;
Carriage Outwards 6,000; Wages 10,000 ; Bills Receivable 20,000; Bills Payable 30,000;
Returns Inwards 6,000; Return Outwards 4,000; Discount Allowed 4,000; Discount Earned
8,000; Salaries 15,000; Debtors 105,000; Creditors 85,000; Investments 30,000; Opening Stock
132,000; Cash at Bank 64,000; Land & Building 180,000.
Adjustments:
a) Closing stock Rs.1,46,000.
b) Create reserve for doubtful debts Rs. 5,000.
c) Depreciate land and building at 10%.
d) Outstanding salaries and wages Rs.2, 000 and Rs.5, 000 respectively.
e) Interest accrued on investments Rs.3, 000.
86. Post the adjustment entries:
a) Closing Stock Rs.7,060
b) Allow interest on capital at 6% p.a.
c) Insurance prepaid Rs.60
d) Depreciate Building and Furniture at 10% p.a.
e) Wages due Rs. 40
f) Provide 10% for RBD and 5% for discount on debtors and
Creditors
g) Depreciate Building and Furniture by 10%
h) Outstanding Wages Rs.40
i) Reserve 105 of the debtors for doubtful
debt
j) Stock of goods on 31-3-2010 Rs.7,060
87. Discuss differences between trading account and profit and loss account.
88. What are the different types of nodes in Decision Tree? Explain in brief.
89. From the following information calculate the annual depreciation based on historical and
replacement cost respectively and show the amount of additional depreciation that should be
provided in each year.
Cost of machinery : Rs. 20,000
Estimated Life : 4 yrs
Residual value : NIL
Inflation factor: 10% p.a.
Use straight line method for computing depreciation.
90. A two-digit number is chosen at random. What is the probability that the chosen number is a
multiple of 7?
91. What is the implication of decision node and chance point in case of decision making?
92. How can you relate Risk and Return?
93. What are the causes of depreciation?
94. What are the types of inflation?
95. An asset purchased at Rs. 17,000 has a lifetime of 5 years and salvage value of Rs. 2,000. If
depreciation is computed using straight line method, calculate the book value of the asset at the
end of 3 years.
96. A box contains 6 white and 4 black balls. Two balls are drawn at random one after another
without replacement. What is the probability of getting 1 white and 1 black ball?
97. Explain economic life of an asset.
98. Write a short note on joint probability.
99. The following data relates to ABC Co. for 2011:
Fixed Factory Overhead = Rs. 30,000
Fixed selling Overhead = Rs. 6,000
Variable Manufacturing Cost per unit = Rs. 6.00
Variable selling cost per unit =Rs. 1.50
Selling Price per unit = Rs. 12.00
Calculate:
i) Break even points in terms of units and BE sales in term of rupees.
ii) Number of units that need to be sold to make a profit of Rs. 45,000.
100. A company has recently purchased an overhead travelling crane for Rs. 25,00,000. Its
expected life is seven years and the salvage value at the end of the life of the overhead travelling
crane is Rs. 1,00,000. Using the straight line method of depreciation, find the depreciation and
the book value at the end of third and fourth year after the crane is purchased.
101. A state government is planning a hydroelectric project for a river basin. In addition to the
production of electric power, this project will provide flood control, irrigation and recreation
benefits. The estimated benefits and costs that are expected to be derived from this project are as
follows:
Initial cost = Rs. 8,00,00,000
Annual power sales = Rs. 60,00,000
Annual flood control savings = Rs. 30,00,000
Annual irrigation benefits = Rs. 50,00,000
Annual recreation benefits = Rs. 20,00,000
Annual operating and maintenance costs = Rs. 30,00,000
Life of the project = 50 years
Check whether the state government should implement the project (Assume i = 12%)
102. A company takes a loan of Rs. 20,00,000 to modernize its boiler section. The loan is to be
repaid in 20 equal installments at 12% interest rate, compounded annually. Find the equal
installment amount that should be paid for the next 20 years.
103. State any two methods of depreciation calculation.
104. Consider the following data of a company for the year 1998:
Sales = Rs. 2,40,000
Fixed Cost = Rs.50,000
Variable Cost = Rs.75,000
Find the following:
a) Contribution5
b) Profit
c) BEP
d) Margin of Safety
105. ABC Toys Pvt. Ltd. is considering the addition of a new toy to its existing product line.
Three alternative courses of action are available:
a) Work overtime to meet the demand of the new toy. Overtime expenses are estimated at
Rs. 20,000 per month.
b) Install new equipment for which fixed expenses per month are expected at Rs. 80,000.
c) Lease (rent) a machine at the rate of Rs. 35,000 per month
Variable cost associated with the above three alternatives are Rs. 9, Rs. 7, Rs. 8
respectively. The price.per unit of the toy, which is independent of the manufacturing
alternative, is fixed at Rs. 15. The expected· demand for the toy is given below:
10000 pieces with the probability of0.5
20000 pieces with the probability of0.3
50000 pieces with the probability of 0.2
Which alternative should the company adopt to manufacture the toy? Use decision tree.

106. What are the uses of price indexes in engineering economic analysis?
107. Calculate discounted payback for the following cash flow: (Assume i= 6%)

Year Cashflow

0 -Rs. 1,000

1 +200

2 +300

3 +1200

4 +1200

108. The interest rate is 16% per year and there are 48 compounding periods per year. The
principal is Rs. 50,000. What is the future worth in 5 years?
109. (i) What do you mean by actual euros and real euros?
(ii) How does inflation happen in an economy?
110. Write down the differences between asset and liability.
111. Explain the concept of any tow current liabilities.
112. What is liquidity ratio? How it can be applied efficiently in interpreting financial condition
of a company.
113. What is cost accounting? What are its objectives?
114. What are different bases of cost classification?
115. Write down the differences between gross profit and net profit.
116. What do you understand by prime cost? Mention the elements.
117. What are the differences between tangible and intangible assets?
118. What is cost of goods sold? Write down the alternative expressions of it.
119. Show the derivation of future value of annuity formula.
120. What is ratio analysis? Discuss the applications of any four ratios.
121. Make the necessary postings for the following adjustment entries:
a) Stock in hand on 31.03.2009 was Rs.20,060
b) Depreciation - Business Premises by Rs.300 and Furniture by Rs.260
c) 5% on debtors for doubtful debts.
d) Interest on capital @5%
e) Unexpired insurance Rs. 200
122. Why should a firm consider replacement of an existing asset? Illustrate with suitable
examples.
123. Prepare balance sheet from the following balances:
Net profit from the profit and loss account: Rs. 15,700; Cash in hand: Rs. 20,000; Machinery Rs.
30,000; Creditors: Rs. 5000; Bills Payable: Rs. 10,000; Goodwill: Rs. 4,000; Resurve Fund : Rs.
15,000; Profit and Loss A/C (Dr.) Rs. 7,000; Proprietor’s Capital A/C : Rs. 40,000; Drawing :
Rs. 5,000; Bills Receivables : Rs. 18,700; Prepaid Salary: Rs.2,000; Income Tax: Rs. 3,000;
Bank Overdraft : Rs. 7,000;Closing Stock: Rs. 3,000; Debtors : Rs. 20,000.
124. From the following figures prepare Profit and Loss Account :
Gross Profit from Trading : Rs. 15,000; Carriage Outward: Rs. 1,500; Telephone Expenses: Rs.
400; Interest on Bank Overdraft: 350; Rent received : 700; Discount Allowed: 50;
Advertisement: 2,000; Lighting : 400; Trade Expenses: 300; Office Expenses: 950.
125. Write a short note on sensitivity analysis.
126. Write the necessary posting for the following entries:
Adjustments:
a) Closing Stock amounted to 35,000
b) Plant and Machinery depreciated by 10% & furniture at 5%
c) Bad debts reserve to be raised 2.5% on debtors
d) Outstanding factory rent Rs.300 and office rent Rs.600
e) Insurance including Rs.100 in respect of 2003.
f) Make Provision for Bad Debts @ 3%
g) Salary due Rs. 200
h) Stock on 31-12-2004 Rs.3500
i) Write off 10% from furniture for depreciation
j) Due from tenants rent Rs. 100
127. Prepare income statement and balance sheet based on the following information and
adjustment as of 31-03-2012:
Capital 281,000; Creditors 20,000; Salaries 10,000;
Commission (Cr) 900; Land 100,000; Insurance
1,200; Bank Overdraft 15,000; Goodwill 15,000;
Cash 5,700; Gross Profit 113,000; General Expenses
5,000; Debtors 50,000. Bad Debt 1,000; Selling Expenses 12,000; Building 200,000; closing
stock 30,000.
Adjustments:
1. Provide depreciation @ 10% on building
2. Further Bad Debt Rs. 1,000
3. Salaries yet to be paid Rs. 3,000
4. Insurance prepaid Rs.300
128. On January 1, a woman deposits $5000 in a credit union that pays 8% nominal annual
interest, compounded quarterly. She wishes to withdraw the money in five equal yearly sums
beginning at December 31 of the first year. How much should she withdraw each year?
129. For Gee-Whiz Devices calculate the following: current ratio and acid-test ratio based on
following data:
Cash Rs.100,000; Market securities 45,000; Net accounts and notes receivable 150,000;
Retailers' inventories 200,000; Prepaid expenses 8,000; Accounts and notes payable (short term)
315,000; Accumulated liabilities to date 90,000.
130. Develop short definitions for the following terms: balance sheet, income statement, and
fundamental accounting equation.
131. State the effects of inflation in detail.