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. A machine costs a company Rs. 52,000 and its effective life is estimated to be 12 years. A sinking fund is created for replacing the machine by a new model at the end of its life time, when its scrap realizes a sum of Rs. 5,000 only. The price of new model is estimated to be 25% higher than the price of the present one. Find what amount should be set aside at the end of each year, out of profits, for the sinking fund, if it accumulates at 10% effective.?
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. A machine costs a company Rs. 52,000 and its effective life is estim...
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To replace a machine costing Rs. 52,000 with a new model after 12 years, a sinking fund must be established to accumulate the necessary amount.
New Model Cost
- The price of the new model is 25% higher than the current machine.
- New model cost = Rs. 52,000 + (25/100 * Rs. 52,000) = Rs. 65,000.
Expected Scrap Value
- At the end of its life, the machine will have a scrap value of Rs. 5,000.
Amount to Accumulate
- Total amount needed at the end of 12 years = New model cost - Scrap value = Rs. 65,000 - Rs. 5,000 = Rs. 60,000.
Sinking Fund Calculation
- The sinking fund accumulates at an effective interest rate of 10%.
- Using the formula for future value of a sinking fund, the annual deposit (A) can be calculated as:
A = Future Value / [(1 + r)^n - 1] / r
- Here, r = 0.10 (interest rate), n = 12 (years).
Annual Deposit Calculation
- Future Value = Rs. 60,000.
- A = 60,000 / [(1 + 0.10)^12 - 1] / 0.10
- Calculate (1 + 0.10)^12 = 3.478.
- Thus, A = 60,000 / [3.478 - 1] / 0.10 = 60,000 / 2.478 / 0.10 = 60,000 / 0.2478 = Rs. 24,196.
Conclusion
- The company should set aside approximately Rs. 24,196 at the end of each year for the sinking fund to ensure they can replace the machine after 12 years.
To replace a machine costing Rs. 52,000 with a new model after 12 years, a sinking fund must be established to accumulate the necessary amount.
New Model Cost
- The price of the new model is 25% higher than the current machine.
- New model cost = Rs. 52,000 + (25/100 * Rs. 52,000) = Rs. 65,000.
Expected Scrap Value
- At the end of its life, the machine will have a scrap value of Rs. 5,000.
Amount to Accumulate
- Total amount needed at the end of 12 years = New model cost - Scrap value = Rs. 65,000 - Rs. 5,000 = Rs. 60,000.
Sinking Fund Calculation
- The sinking fund accumulates at an effective interest rate of 10%.
- Using the formula for future value of a sinking fund, the annual deposit (A) can be calculated as:
A = Future Value / [(1 + r)^n - 1] / r
- Here, r = 0.10 (interest rate), n = 12 (years).
Annual Deposit Calculation
- Future Value = Rs. 60,000.
- A = 60,000 / [(1 + 0.10)^12 - 1] / 0.10
- Calculate (1 + 0.10)^12 = 3.478.
- Thus, A = 60,000 / [3.478 - 1] / 0.10 = 60,000 / 2.478 / 0.10 = 60,000 / 0.2478 = Rs. 24,196.
Conclusion
- The company should set aside approximately Rs. 24,196 at the end of each year for the sinking fund to ensure they can replace the machine after 12 years.
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. A machine costs a company Rs. 52,000 and its effective life is estimated to be 12 years. A sinking fund is created for replacing the machine by a new model at the end of its life time, when its scrap realizes a sum of Rs. 5,000 only. The price of new model is estimated to be 25% higher than the price of the present one. Find what amount should be set aside at the end of each year, out of profits, for the sinking fund, if it accumulates at 10% effective.?
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. A machine costs a company Rs. 52,000 and its effective life is estimated to be 12 years. A sinking fund is created for replacing the machine by a new model at the end of its life time, when its scrap realizes a sum of Rs. 5,000 only. The price of new model is estimated to be 25% higher than the price of the present one. Find what amount should be set aside at the end of each year, out of profits, for the sinking fund, if it accumulates at 10% effective.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about . A machine costs a company Rs. 52,000 and its effective life is estimated to be 12 years. A sinking fund is created for replacing the machine by a new model at the end of its life time, when its scrap realizes a sum of Rs. 5,000 only. The price of new model is estimated to be 25% higher than the price of the present one. Find what amount should be set aside at the end of each year, out of profits, for the sinking fund, if it accumulates at 10% effective.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for . A machine costs a company Rs. 52,000 and its effective life is estimated to be 12 years. A sinking fund is created for replacing the machine by a new model at the end of its life time, when its scrap realizes a sum of Rs. 5,000 only. The price of new model is estimated to be 25% higher than the price of the present one. Find what amount should be set aside at the end of each year, out of profits, for the sinking fund, if it accumulates at 10% effective.?.
. A machine costs a company Rs. 52,000 and its effective life is estimated to be 12 years. A sinking fund is created for replacing the machine by a new model at the end of its life time, when its scrap realizes a sum of Rs. 5,000 only. The price of new model is estimated to be 25% higher than the price of the present one. Find what amount should be set aside at the end of each year, out of profits, for the sinking fund, if it accumulates at 10% effective.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about . A machine costs a company Rs. 52,000 and its effective life is estimated to be 12 years. A sinking fund is created for replacing the machine by a new model at the end of its life time, when its scrap realizes a sum of Rs. 5,000 only. The price of new model is estimated to be 25% higher than the price of the present one. Find what amount should be set aside at the end of each year, out of profits, for the sinking fund, if it accumulates at 10% effective.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for . A machine costs a company Rs. 52,000 and its effective life is estimated to be 12 years. A sinking fund is created for replacing the machine by a new model at the end of its life time, when its scrap realizes a sum of Rs. 5,000 only. The price of new model is estimated to be 25% higher than the price of the present one. Find what amount should be set aside at the end of each year, out of profits, for the sinking fund, if it accumulates at 10% effective.?.
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