On January 1, 2022, Romania Company purchased a specialized factory equipment for cash at a purchase price of P700,000. The company incurred P20,000 freight cost and handling costs of P10,000. The...

On January 1, 2022, Romania Company purchased a specialized factory equipment for cash at a purchase price

of P700,000. The company incurred P20,000 freight cost and handling costs of P10,000. The company expects

that it will incur dismantling cost amounting to P80,000 at the end of the equipment’s 5-year useful life. The

prevailing market interest rate during the transaction date was 6%.

The present value factor of P1 at 6% for 5 periods is at 0.747

The present value factor of P1 ordinary annuity for 5 periods is at 4.212

1) How much is the initial cost of the equipment?

A
.

730,000 B. 810,000 C. 1,066,960 D. 789,760

2) Assuming the company is using the straight line method, how much is the total expenses for the year

ended December 31, 2022?

A
.

171,952 B. 157,952 C. 161,538 D. 175,538