Question 1

What is the formula to compute the present value of a single sum?

Accepted Answer

@#IMG-DLM&_TB6205_00

Question 2

In what situations would a company use present or future value?

Accepted Answer

1) Measuring and reporting certain types

Question 3

Beginning December 31, 2018, eight equal annual withdrawals will be made.
Required:
Using the appropriate tables, determine the equal annual withdrawals if $30,000 is invested at an interest rate of 14% compounded annually on:
1) January 1, 2018
2) December 31, 2018
3) January 1, 2013

Accepted Answer

1) The investment is made one year prior

Question 4

Charlie's Construction Co. acquired a new $800,000 backhoe on April 1, 2014. Charlie's will make six annual payments based upon 8% interest compounded annually, starting on March 31, 2015. How much will each payment be?

Accepted Answer

A)  $504,136 
B)  $173,056 
C)  $160,234 
D)  $109,052 
A)  $504,136 
B)  $173,056 
C)  $160,234 
D)  $109,052

Question 5

The future value of $7,000 deposited today and compounded quarterly at a 16% annual interest rate for five years is

Accepted Answer

A)  $14,724 
B)  $14,702 
C)  $ 8,517 
D)  $15,338 
A)  $14,724 
B)  $14,702 
C)  $ 8,517 
D)  $15,338

Question 6

Each of the following compound interest factors has the same number of periods (n) at the same interest rate (i). Which one is the table factor for the present value of a single sum?

Accepted Answer

A)  1.500730 
B)  7.153291 
C)  0.666342 
D)  4.766540 
A)  1.500730 
B)  7.153291 
C)  0.666342 
D)  4.766540

Question 7

Suppose you borrow money from your parents for college tuition on January 1, 2013. Your parents require four annual payments of $1,000 each, with the first payment due on January 1, 2017. They are charging you 6% annual interest. What is the cost of the college tuition?

Accepted Answer

A)  $2,909.37 
B)  $1,593.85 
C)  $4,000.00 
D)  none of these 
A)  $2,909.37 
B)  $1,593.85 
C)  $4,000.00 
D)  none of these

Question 8

You would like to deposit a sum of money today that would enable you to withdraw $2,000 a year for ten years. If the interest paid on the amount deposited is 10% compounded annually and if the first withdrawal is made one year from today, the formula you would use to determine the amount of the initial deposit is the

Accepted Answer

A)  present value of a deferred annuity 
B)  present value of an annuity due 
C)  present value of an ordinary annuity 
D)  future value of an ordinary annuity 
A)  present value of a deferred annuity 
B)  present value of an annuity due 
C)  present value of an ordinary annuity 
D)  future value of an ordinary annuity

Question 9

Jackie's parents loaned her $80,000 to fund her college education. Her parents are not charging interest. They desire to be paid one lump sum of $80,000 when Jackie can accumulate that amount. Jackie established a savings plan that earns 8% compounded annually. Her new job promises to pay an annual holiday bonus that will enable her to make equal annual, year-end deposits of $6,400. Approximately how many years will it take Jackie to accumulate the $80,000?

Accepted Answer

A)  8 years 
B)  8.5 years 
C)  9 years 
D)  12.5 years 
A)  8 years 
B)  8.5 years 
C)  9 years 
D)  12.5 years

Question 10

Mildred desires to have $7,049 on deposit five years from today. If she has $4,000 to deposit, what rate of interest, compounded annually, must be obtained to accumulate the desired $7,049 in five years?

Accepted Answer

A)  12% 
B)  10% 
C)  9% 
D)  8% 
A)  12% 
B)  10% 
C)  9% 
D)  8%

Question 11

The formula for the present value of a single sum at compound interest is

Accepted Answer

A)  $\frac { P V } { ( 1 + i ) ^ { n } }$ 
B)  FV x (1 + i)n 
C)  FV x $\frac { 1 } { ( 1 + i ) ^ { n } }$ 
D)  PV x $\frac { 1 } { ( 1 + i ) ^ { n } }$ 
A)  $\frac { P V } { ( 1 + i ) ^ { n } }$ 
B)  FV x (1 + i)n 
C)  FV x $\frac { 1 } { ( 1 + i ) ^ { n } }$ 
D)  PV x $\frac { 1 } { ( 1 + i ) ^ { n } }$

Question 12

The formula to compute the present value of a dollar is PV = FV x . $\frac { 1 } { ( 1 + i ) ^ { n } }$

Accepted Answer

A) True 
 B)False

Question 13

The FASB concepts statement relating to cash flow information introduces the concept of expected cash flows when using present values for accounting measurements. Assume that Smith Company determined that it has a 40% probability of receiving $10,000 one year from now and a 60% probability of receiving $10,000 two years from now.
Required:
Using the FASB concepts, calculate the present value of the expected cash flows assuming a 12% interest rate compounded annually.

Accepted Answer

Present value of a s

Question 14

Although most accountants believe that the use of present value creates relevant accounting measurements, there are some reliability questions. Discuss the reasons why present value computations create less reliable measurements.

Accepted Answer

Reliability questions exist with present

Question 15

An annuity is a series of equal cash flows occurring at irregular intervals with interest compounded at a specific rate.

Accepted Answer

A) True 
 B)False

Question 16

Using the present value tables, solve the following problems.
Required:
1) What is the present value of a $100,000 loan issued on January 1, 2014, due on January 1, 2019, discounted at 14% compounded annually?
2) What is the present value of a $100,000 loan issued on January 1, 2014, due on July 1, 2019 discounted at 16% compounded quarterly?
3) What is the amount of the present value discount on $25,000 due at the end of seven years at 9% compounded annually?

Accepted Answer

The answer of Using the present value tables, solve the...

Question 17

Tessa won the lottery for $2,500,000 but due to a change in state laws she will not be able to collect it for three years. Ralph is willing to give her a lump sum today in return for the payment in three years. If current interest rates are 14% per year, how much will Tessa receive today?

Accepted Answer

A)  $1,687,430 
B)  $5,804,080 
C)  $2,500,000 
D)  $3,703,860 
A)  $1,687,430 
B)  $5,804,080 
C)  $2,500,000 
D)  $3,703,860

Question 18

Compound interest is

Accepted Answer

A)  calculated by multiplying the principal times the rate times the period of time 
B)  interest on the original principal plus any past unpaid accrued interest to date 
C)  interest on the original principal paid or received 
D)  interest on any past unpaid interest accrued to date 
A)  calculated by multiplying the principal times the rate times the period of time 
B)  interest on the original principal plus any past unpaid accrued interest to date 
C)  interest on the original principal paid or received 
D)  interest on any past unpaid interest accrued to date

Question 19

Using the table approach, the future amount of an annuity due may be calculated by finding the table factor for the future amount of an ordinary annuity of

Accepted Answer

A)  n + 1 and then subtract 1 
B)  n + 1 and then add 1 
C)  n - 1 and then add 1 
D)  n - 1 and then subtract 1 
A)  n + 1 and then subtract 1 
B)  n + 1 and then add 1 
C)  n - 1 and then add 1 
D)  n - 1 and then subtract 1

Question 20

An accounting student has just been introduced to present value analysis and comes to you with the following question, "How is present value used in the financial statements?"
Required:
Give the student examples of financial statement accounts that are stated at present value and explain the advantages of using present value for certain financial statement items.

Accepted Answer

Present value has many applications in a

What is the formula to compute the present value of a single sum?

In what situations would a company use present or future value?

Beginning December 31, 2018, eight equal annual withdrawals will be made. Required: Using the appropriate tables, determine the equal annual withdrawals if $30,000 is invested at an interest rate of 14% compounded annually on: 1) January 1, 2018 2) December 31, 2018 3) January 1, 2013

Charlie's Construction Co. acquired a new $800,000 backhoe on April 1, 2014. Charlie's will make six annual payments based upon 8% interest compounded annually, starting on March 31, 2015. How much will each payment be?

The future value of $7,000 deposited today and compounded quarterly at a 16% annual interest rate for five years is

Each of the following compound interest factors has the same number of periods (n) at the same interest rate (i). Which one is the table factor for the present value of a single sum?

Suppose you borrow money from your parents for college tuition on January 1, 2013. Your parents require four annual payments of $1,000 each, with the first payment due on January 1, 2017. They are charging you 6% annual interest. What is the cost of the college tuition?

Mildred desires to have $7,049 on deposit five years from today. If she has $4,000 to deposit, what rate of interest, compounded annually, must be obtained to accumulate the desired $7,049 in five years?

The formula for the present value of a single sum at compound interest is

The formula to compute the present value of a dollar is PV = FV x . $\frac { 1 } { ( 1 + i ) ^ { n } }$

Although most accountants believe that the use of present value creates relevant accounting measurements, there are some reliability questions. Discuss the reasons why present value computations create less reliable measurements.

An annuity is a series of equal cash flows occurring at irregular intervals with interest compounded at a specific rate.

Tessa won the lottery for $2,500,000 but due to a change in state laws she will not be able to collect it for three years. Ralph is willing to give her a lump sum today in return for the payment in three years. If current interest rates are 14% per year, how much will Tessa receive today?

Compound interest is

Using the table approach, the future amount of an annuity due may be calculated by finding the table factor for the future amount of an ordinary annuity of

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Filters

Exam 23: Time Value of Money Module

What is the formula to compute the present value of a single sum?

In what situations would a company use present or future value?

Beginning December 31, 2018, eight equal annual withdrawals will be made. Required: Using the appropriate tables, determine the equal annual withdrawals if $30,000 is invested at an interest rate of 14% compounded annually on: 1) January 1, 2018 2) December 31, 2018 3) January 1, 2013

Charlie's Construction Co. acquired a new $800,000 backhoe on April 1, 2014. Charlie's will make six annual payments based upon 8% interest compounded annually, starting on March 31, 2015. How much will each payment be?

The future value of $7,000 deposited today and compounded quarterly at a 16% annual interest rate for five years is

Each of the following compound interest factors has the same number of periods (n) at the same interest rate (i). Which one is the table factor for the present value of a single sum?

Suppose you borrow money from your parents for college tuition on January 1, 2013. Your parents require four annual payments of $1,000 each, with the first payment due on January 1, 2017. They are charging you 6% annual interest. What is the cost of the college tuition?

Mildred desires to have $7,049 on deposit five years from today. If she has $4,000 to deposit, what rate of interest, compounded annually, must be obtained to accumulate the desired $7,049 in five years?

The formula for the present value of a single sum at compound interest is

The formula to compute the present value of a dollar is PV = FV x . 1(1+i)n\frac { 1 } { ( 1 + i ) ^ { n } }(1+i)n1​

Although most accountants believe that the use of present value creates relevant accounting measurements, there are some reliability questions. Discuss the reasons why present value computations create less reliable measurements.

An annuity is a series of equal cash flows occurring at irregular intervals with interest compounded at a specific rate.

Tessa won the lottery for $2,500,000 but due to a change in state laws she will not be able to collect it for three years. Ralph is willing to give her a lump sum today in return for the payment in three years. If current interest rates are 14% per year, how much will Tessa receive today?

Compound interest is

Using the table approach, the future amount of an annuity due may be calculated by finding the table factor for the future amount of an ordinary annuity of

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Filters

The formula to compute the present value of a dollar is PV = FV x . $\frac { 1 } { ( 1 + i ) ^ { n } }$