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1
1.A CNC machine for the manufacture of finished product costs P77,821 and have salvage value of 8.200 at the end of an estimated 13 year useful life. Compute the 5th year depreciation using sum-of-years-digit method.
2. One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00. Taking these three transactions into account, what is the effect on GDP? a. GDP increases by $1.50 b. GDP increases by $3.50 CGDP increases by $6.00 d. GDP increases by $7.50
Expert Solution
1.Cost of machine = 77,821
Salvage = 8,200
Life = 13 years
Depreciation fraction in table below is calculated as: [Remaining life of balance / Sum of Remaining life of balance]
Depreciation expense = Depreciation base * Depreciation fraction.
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2.Gross Domestic Product ( GDP)
Gross Domestic Product can be defined as the market value of all final goods and services produced in a domestic territory of a country during an accounting year..
In the above question, since the first bag flour is sold to bake bread and after the bread making process, they sold it to the consumer for $ 4.00, the GDP of this product is now 4.00 because here, the consumer is paying the cost of producing it (flour cost is also included in the bakery price. That is $4).
In the second bag of flour is being sold to a consumer for $2.00 in a grocery store and the consumer is paying its final cost.
Considering these three transactions, the GDP increases by $ 6.00.
*** The answer is option - C
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