FINALS

Question 1

It is the sum of its first cost and the present worth of all costs for replacement, operation and maintenance for a long time or forever.

Answer 1

Capitalized Cost

Question 2

It is the sum of the annual depreciation cost, interest of the first cost and the annual operating and maintenance costs.

Answer 2

Annual Cost

Question 3

It is the reduction of fall in the value of an asset or physical property during the course of its working life and due to the passage of time.

Answer 3

Depreciation

Question 4

Enumerate the types of depreciation.

Answer 4

1. Normal Depreciation
   a. Physical Depreciation
   b. Functional Depreciation
2. Depreciation Due to Changes in Price Levels

Question 5

It is due to the reduction of the physical ability of an equipment or asset to produce results.

Answer 5

Physical Depreciation

Question 6

It is due to the reduction in the demand for the function that the equipment or asset was designed or rendered.

Answer 6

Functional Depreciation

Question 7

This type of depreciation is often called obsolescence.

Answer 7

Functional Depreciation

Question 8

In almost all instances, it is impossible to predict prices of property and therefore, is not considered in economic studies.

Answer 8

Depreciation Due to Changes in Price Levels

Question 9

In this method of computing depreciation, it is assumed that the loss in value is directly proportional to the age of the equipment or asset.

Answer 9

Straigh Line Method (SLM)

Question 10

In this method of computing depreciation, it is assumed that a sinking fund is established in which funds will accumulate for replacement purposes.

Answer 10

Sinking Fund Method (SFM)

Question 11

In this method of computing depreciation, it is assumed that the annual cost of depreciation is a fixed percentage of the book value at the beginning of the year.

Answer 11

Declining Balance Method (DBM)

Question 12

Other names for Declining Balance Method (DBM)

Answer 12

1. Constant percentage method
2. Matheson Formula

Question 13

The depreciation charge in this method is assumed to vary directly to the number of years and inversely to the sum of the years’ digit.

Answer 13

Sum-of-the-Year’s Digit Method (SYDM)

Question 14

It is the reduction of the value of certain natural resources such as mines, oil, timber, etc. due to the gradual extraction of its contents.

Answer 14

Depletion cost

Question 15

It is an annual charge that is made for the maintenance of investment in wasting assets such as mines, oil and gas as well.

Answer 15

Depletion

Question 16

This method is dependent on the initial cost of the property and the number of units in the property.

Answer 16

Unit or Factor Method

Question 17

It is owned by the investors in the enterprise and they expect to earn profit from their investment. However, there is no obligation to pay them when there is no profit.

Answer 17

Equity Capital

Question 18

These are fixed obligations and failure to repay them on time usually leads to embarrassment or foreclosure of the property pledged as collateral.

Answer 18

Borrowed capital or debt capital

Question 19

It includes all those funds which are required to make the enterprise a going concern.

Answer 19

Working Capital

Question 20

Two Kinds of Working Capital

Answer 20

1. Initial Working Capital
2. Regular Working Capital

Question 21

It is the amount needed at the beginning of operations and permits the enterprise to begin functioning after it receives any income from the sides of its products or service.

Answer 21

Initial Working Capital

Question 22

It is what needed when operations have been in progress for sufficient time and have been normalized. It is usually less than initial working capital.

Answer 22

Regular Working Capital

Question 23

It is the simplest form of business organization, wherein the business is owned entirely by one person who is responsible for the operation.

Answer 23

Individual ownership or sole propriertorship

Question 24

All profits are obtained from the business are his/her alone, but he must also bear all losses should they be incurred.

Answer 24

Individual ownership or sole propriertorship

Question 25

It is an association of two or more persons for the purpose of engaging in a business for
profit.

Answer 25

Partnership

Question 26

It is a distinct legal entity, separate from the individuals who own it, and which engage in a practically any business transaction which a person could do.

Answer 26

Corporation

Question 27

It is considered the most important type of business organization and may have perpetual life if desired since it is legal entity it may use or be used in its own name.

Answer 27

Corporation