3.09 Set 3 Mock Exam Rea

Mock Exam / MLD Compilation
REA MOCK EXAM
SET 3
1. A building is depreciated at 2.5% per year on a straight-line basis. What is the

estimated useful life of the building?
Estimated Useful life = 1/n = 1/2.5% = 40 years
2. A residential land is located at Orange City with an area of 2,200 square meters and
cost per sq.m. is P3,500. It has a corner influence of 25% because of its location,
topography advantage of 20% because it is plain and a plottage of 10% because of its
shape. Compute the value of the property.
Land Value (2,200 @P3,500/sq.m.) = P 7,700,000

Add Adjustment factors:
Corner influence (P7.70M x 25%) = 1,925,000
Topography advantage (P7.70M x 20%) = 1,540,000
Plottage (P7.70M x10%) = 770,000
Value of the Property = 11,935,000
3. Using the 4-3-2-1 depth rule, if a 10-hectare belonging to different owners namely;
Mamita, Tiyo, Alan and L.A was sold for P10,0M, what is the share of each owner?
1st Lot owner: (P10.0M x40%) P4.0M

2nd Lot owner: (P10.0M x30%) P3.0M
3rd Lot owner: (P10.0M x20%) P2.0M
4th Lot owner: (P10.0M x10%) P1.0M
Note: 4-3-2-1 Rule means:

“4” = 40% of the lot value (front quarter) adjacent
to the road;
“3” = 30% of the lot value (second quarter);
“2” = 20% of the lot value (third quarter);
“1” = 10% of the lot value (fourth quarter)
4. Rebisco bought 50 hectares of land at P700 per sq.m. If the medium subd.
development costs of P1,000/sq.m. is based on the saleable area which is 60% of the
gross area, compute the following:
(a) Total land acquisition cost;
(b) Total Development cost;
(c) Total unit costs per sq.m. of the saleable lots;
(d) If the projected gross mark up is 100% of the total unit costs/sq.m. of the saleable
lots, what will be the selling price per square meter?
(a) Land Acquisition Cost: 50 hectares x 10,000 sq.m. @P700/sq.m. = P350.00M
Compiled by Miguelle L. Dela Fuente

(b) Development Cost: 500,000 sq.m. x @P1,000/sq.m. = P500.00M

(c) Lot Unit Cost = (Land Acquisition Cost + Developmental Cost) / Saleable area =
P(350.0M + P500.0M) / 300,000 sq.m. = 2,8533/sq.m.
(d) Selling Price/sq.m.= Unit Cost + Desired Profit
= 2,8533+2,8533 =5,766/sq.m.
For Question Nos. 5-7 A Real Estate Property was valued and assessed by Mun.
Assessor in the following amount and rate:
Kind of Market Assessment Basic Tax Rate

Property Value Level Realty Tax SEF
Land P5.0M 50% 2% 1%
Building P15.0M 80% 2% 1%
Machineries P3.0M 80% 2% 1%
compute the following:
5. Basic realty tax before discount for one quarter?:
Land: P5.0M x 50% x 2%/4 quarters = P12,500

Building: P15.0M x 80% x 2%/4 quarters = 60,000
Machineries: P3.0M x 80% x 2%/4 quarters = 12,000
Total Realty Tax for one quarter = P84,500
6. Total Special Education Fund Tax for one year before discount?
Land: P5.0M x 50% x 1% P 25,000

Building: P15.0M x 80% x 1% 120,000
Machineries: P3.0M x 80% x 1% 24,000
Total Realty Tax for one quarter P169,000
7. Total Taxes (basic and SEF) for one-year discount is 10%?
Land: P12,500 x 90% x 4 quarters P 45,000

Building: P60,000 x 90% x 4 quarters 216,000
Machineries: P12,000 x 90% x 4 quarters 43,200
Total Basic Tax for one year, net of 10% P304,200
Land: P25,000 x 90% P 22,500
Building: P120,000 x 90% 108,000
Machineries: P24,000 x 90% 21,600
Total SEF Tax for one year, net of 10% P152,100
TOTAL BASIC AND SEF, net of 10% discount = P456,300

8. A commercial property producing an annual gross income of P390,000 was sold two
months ago for P3,412,500. What is the property's gross income multiplier?
Annual Gross income / Sales Price = P3,412,500.00 / 390,000.00 = 8.75 GIM
9. The property under appraisal is a 25 year-old apartment building producing a net

operating income of P50,000 a year. Compute the value of the property, assuming a
remaining economic life of 40 years for the building at 10.5% interest rate and land
value is estimated at P100,000.00
Net Operating Income P50,000.00

Less: Income due to land (P100,000 x 10.5%) 10,500.00
Income due to building P39,500.00
Building Value {P39,500/12.04 (10.5% + 1.54 (1/65)} P328,073.00

Add: Land Value 100,000.00
Total Property Value P428,073.00
V=I/R
Where: V= Value
I= income
Rate= interest rate
To find the Building value, the Rate should be interest rate plus recapture rate; formula
property, assuming a
Rate= interest rate + Recapture rate
Recapture rate= 1/Economic life of the building
10: You can afford to put 10,000 in a savings account today that pays 6% interest
compounded annually. How much will you have 5 years from now if you make no
withdrawals?
PV = 10,000 i = .06 n = 5
FV = 10,000 (1 + .06)5 = 10,000 (1.3382255776)
ANSWER = 13,382.26
11. Another financial institution offers to pay 6% compounded semiannually. How much
will your 10,000 grow to in five years at this rate?
PV = 10,000 i = .06 / 2 = .03 n = 5 * 2 = 10

FV = 10,000 (1 + .03)10 = 10,000 (1.343916379)

ANSWER= 13,439.16
12. What amount will accumulate if we deposit 5,000 at the end of each year for the
next 5 years? Assume an interest of 6% compounded annually. FV = PMT ([(1 + i )n –
1]/i )
FVoa = PMT ((1 + i)n - 1) / i

PV = 5,000
i = .06
n=5
FVoa = 5,000 (1.3382255776 - 1) / .06
ANSWER = 5,000 (5.637092) = 28,185.46
FVad = FVoa (1+i)

PV = 5,000 i = .06 n = 5
FVoa = 28,185.46 (1.06) = 29,876.59
13. What amount will accumulate if we deposit 5,000 at the beginning of each year for
the next 5 years? Assume an interest of 6% compounded annually. . FV = PMT ([(1 + i
)n + 1]/i )
FVad = FVoa (1+i)

PV = 5,000 i = .06 n = 5
FVoa = 28,185.46 (1.06) = 29,876.59
14. You want to buy a house 5 years from now for 150,000. Assuming a 6% interest
rate compounded annually, how much should you invest today to yield 150,000 in 5
years?
PV=FV(1+i)^-n pv=150000(1.06)^-5
PV = FV [( 1 ) /(1 + i)n
FV = 150,000
i =.06
n=5
PV = 150,000 [( 1 ) / (1 + .06)5]
= 150,000 [( 1 ) / 1.3382255776 ]
ANSWER = 112,088.73

15. What amount must you invest today at 6% compounded annually so that you can
withdraw 5,000 at the end of each year for the next 5?
PV = PMT [( 1-(1 + i)-n ] / i
5000((1-(1+.06)^-5))/.06
PMT = 5,000
i = .06
n=5
PVoa = 5,000 [(1 - (1/(1 + .06)5)) / .06] = 5,000 (4.212364)
Answer= 21,061.82

3.09 Set 3 Mock Exam Rea

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3.09 Set 3 Mock Exam Rea

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Mock Exam / MLD Compilation

REA MOCK EXAM

1. A building is depreciated at 2.5% per year on a straight-line basis. What is the

Estimated Useful life = 1/n = 1/2.5% = 40 years

Land Value (2,200 @P3,500/sq.m.) = P 7,700,000

1st Lot owner: (P10.0M x40%) P4.0M

Note: 4-3-2-1 Rule means:

(a) Land Acquisition Cost: 50 hectares x 10,000 sq.m. @P700/sq.m. = P350.00M

Compiled by Miguelle L. Dela Fuente

(b) Development Cost: 500,000 sq.m. x @P1,000/sq.m. = P500.00M

Kind of Market Assessment Basic Tax Rate

5. Basic realty tax before discount for one quarter?:

Land: P5.0M x 50% x 2%/4 quarters = P12,500

Land: P5.0M x 50% x 1% P 25,000

7. Total Taxes (basic and SEF) for one-year discount is 10%?

Land: P12,500 x 90% x 4 quarters P 45,000

Compiled by Miguelle L. Dela Fuente

Annual Gross income / Sales Price = P3,412,500.00 / 390,000.00 = 8.75 GIM

9. The property under appraisal is a 25 year-old apartment building producing a net

Net Operating Income P50,000.00

Building Value {P39,500/12.04 (10.5% + 1.54 (1/65)} P328,073.00

PV = 10,000 i = .06 / 2 = .03 n = 5 * 2 = 10

Compiled by Miguelle L. Dela Fuente

FV = 10,000 (1 + .03)10 = 10,000 (1.343916379)

FVoa = PMT ((1 + i)n - 1) / i

FVad = FVoa (1+i)

FVad = FVoa (1+i)

Compiled by Miguelle L. Dela Fuente

Compiled by Miguelle L. Dela Fuente

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