Question 1

What four conditions must exist in solving measurement problems involving the use of annuities?

Accepted Answer

1) The periodic cash flows are equal in

Question 2

The formula for the future value of an ordinary annuity of any amount is: $$F V _ { o } = C \times \left[ \frac { ( 1 + n ) ^ { i } - 1 } { i } \right]$$

Accepted Answer

A) True 
 B)False

Question 3

David Company borrowed $550,000 on December 31, 2014. The loan will be paid with six equal annual payments of $115,388, beginning on December 31, 2015. The rate of interest compounded annually for the loan is

Accepted Answer

A)  9% 
B)  8% 
C)  7% 
D)  6% 
A)  9% 
B)  8% 
C)  7% 
D)  6%

Question 4

What is the formula for the present value of an ordinary annuity of 1?

Accepted Answer

A)  $\frac { ( 1 + i ) ^ { n - 1 } } { i }$ 
B)  $\frac { 1 } { ( 1 + i ) ^ { n } }$ 
C)  (1 + i)n 
D)  $\frac { 1 - \left[ 1 / ( 1 + i ) ^ { n } \right] } { i }$ 
A)  $\frac { ( 1 + i ) ^ { n - 1 } } { i }$ 
B)  $\frac { 1 } { ( 1 + i ) ^ { n } }$ 
C)  (1 + i)n 
D)  $\frac { 1 - \left[ 1 / ( 1 + i ) ^ { n } \right] } { i }$

Question 5

Stacey has $5,000,000 on deposit in a fund that earns 9% interest compounded annually. How much can Stacey withdraw annually from the fund in ten equal annual withdrawals to completely deplete the fund after the tenth draw, assuming the first withdrawal occurs one year from today?

Accepted Answer

A)  $450,000 
B)  $714,771 
C)  $779,100 
D)  $555,555 
A)  $450,000 
B)  $714,771 
C)  $779,100 
D)  $555,555

Question 6

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

Accepted Answer

@#IMG-DLM&_TB6205_00

Question 7

Beginning December 31, 2014, ten equal, annual withdrawals are to be made.
Required:
Using the appropriate tables, determine the equal, annual withdrawals if $140,000 is invested on January 1, 2014 at an interest rate of 10% compounded annually.

Accepted Answer

The answer of Beginning December 31, 2014, ten equal, annual...

Question 8

Using the compound interest tables, answer each of the following questions.
Required: a. Assuming that $\$ 100,000$ to be paid at the end of ten years has a present value today of $\$ 50,834.90$, what interest rate compounded annually is used in the calculation of the present value?
b. What amount must be deposited today if $\$ 200,000$ is to be accumulated six years from today, and interest at $12 \%$ is compounded semiannually?

Accepted Answer

The answer of Using the compound interest tables, answer each...

Question 9

To calculate the present value of four annual installments of $1,000 at an 8% interest rate beginning on January 1, 2013 and payments due on December 31 of each year, one would use the present value of an ordinary annuity table.

Accepted Answer

A) True 
 B)False

Question 10

The present value of $500,000 received at the end of five years discounted at 10% is

Accepted Answer

A)  $805,255 
B)  $310,461 
C)  $306,957 
D)  none of these 
A)  $805,255 
B)  $310,461 
C)  $306,957 
D)  none of these

Question 11

Savannah has just won the state lottery. She will receive ten equal annual payments of $15,000, beginning one year from today. Assuming an 8% interest rate compounded annually, the present value of those receipts today is

Accepted Answer

A)  $80,913 
B)  $100,651 
C)  $108,703 
D)  $102,000 
A)  $80,913 
B)  $100,651 
C)  $108,703 
D)  $102,000

Question 12

The formula to calculate a present value of a deferred annuity is:
PVdeferred = C x (Converted Factor for Present Value of Deferred Annuity of 1)

Accepted Answer

A) True 
 B)False

Question 13

Using the compound interest tables, answer the following questions.
Required: 
-a. How much will be accumulated on January 1, 2018 if $\$ 450,000$ is deposited on January 1, 2014, andinterest is compoumded annually at $10 \%$ ?
b. How much vill be accumulated on December 31,2024 if $\$ 80,000$ is deposited on December 31,2014, and the fumd pays $9 \%$ interest compounded semiancaally?
c. What will he on deposit on January 1, 2019 if $\$ 50,000$ is deposited on January 1, 2014, in a fund that earns I $6 \%$ interest compounded quarterly?

Accepted Answer

The answer of Using the compound interest tables, answer the...

Question 14

Which of the following transactions would require the use of the present value of an annuity due concept in order to calculate the present value of an asset acquired or liability assumed?

Accepted Answer

A)  A rental agreement is entered into with the initial payment due immediately. 
B)  A rental agreement is entered into with the initial payment due one month from the signing of the agreement. 
C)  A note payable is obtained from a bank requiring monthly payments for six years, beginning at the end of the current month. 
D)  A machine is acquired by paying $20,000 cash and agreeing to pay equal annual amounts of $10,000 each at the end of the next three years. 
A)  A rental agreement is entered into with the initial payment due immediately. 
B)  A rental agreement is entered into with the initial payment due one month from the signing of the agreement. 
C)  A note payable is obtained from a bank requiring monthly payments for six years, beginning at the end of the current month. 
D)  A machine is acquired by paying $20,000 cash and agreeing to pay equal annual amounts of $10,000 each at the end of the next three years.

Question 15

To determine the converted table factor for the present value of an annuity due, one must find the factor for the present value of an ordinary annuity for

Accepted Answer

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

Question 16

A beginning accounting student comes to you with the following question, "What is the time value of money and does it relate to interest?"
Required:
Explain the two concepts and how they are related.

Accepted Answer

Money can be used to acquire assets that

Question 17

The interest that accrues on both the principal and the past unpaid accrued interest is called compound interest.

Accepted Answer

A) True 
 B)False

Question 18

Interest compounded quarterly on a $100,000 principal amount at 12% for one year is

Accepted Answer

A)  $ 9,273 
B)  $12,551 
C)  $12,000 
D)  none of these 
A)  $ 9,273 
B)  $12,551 
C)  $12,000 
D)  none of these

Question 19

On April 1, 2014, Meyers Company purchased a bulldozer. Payment, totaling $70,000, is not due until April 1, 2016. Assuming interest at a 12% annual rate, Meyers should debit Machinery on April 1, 2014, in the amount of

Accepted Answer

A)  $70,000 
B)  $62,500 
C)  $61,600 
D)  $55,804 
A)  $70,000 
B)  $62,500 
C)  $61,600 
D)  $55,804

Question 20

The formula for the future value of a single amount at compound interest is

Accepted Answer

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

Exam 23: Time Value of Money Module

What four conditions must exist in solving measurement problems involving the use of annuities?

The formula for the future value of an ordinary annuity of any amount is: FVo=C×[(1+n)i−1i]F V _ { o } = C \times \left[ \frac { ( 1 + n ) ^ { i } - 1 } { i } \right]FVo​=C×[i(1+n)i−1​]

David Company borrowed $550,000 on December 31, 2014. The loan will be paid with six equal annual payments of $115,388, beginning on December 31, 2015. The rate of interest compounded annually for the loan is

What is the formula for the present value of an ordinary annuity of 1?

Stacey has $5,000,000 on deposit in a fund that earns 9% interest compounded annually. How much can Stacey withdraw annually from the fund in ten equal annual withdrawals to completely deplete the fund after the tenth draw, assuming the first withdrawal occurs one year from today?

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

Beginning December 31, 2014, ten equal, annual withdrawals are to be made. Required: Using the appropriate tables, determine the equal, annual withdrawals if $140,000 is invested on January 1, 2014 at an interest rate of 10% compounded annually.

To calculate the present value of four annual installments of $1,000 at an 8% interest rate beginning on January 1, 2013 and payments due on December 31 of each year, one would use the present value of an ordinary annuity table.

The present value of $500,000 received at the end of five years discounted at 10% is

Savannah has just won the state lottery. She will receive ten equal annual payments of $15,000, beginning one year from today. Assuming an 8% interest rate compounded annually, the present value of those receipts today is

The formula to calculate a present value of a deferred annuity is: PVdeferred = C x (Converted Factor for Present Value of Deferred Annuity of 1)

Which of the following transactions would require the use of the present value of an annuity due concept in order to calculate the present value of an asset acquired or liability assumed?

To determine the converted table factor for the present value of an annuity due, one must find the factor for the present value of an ordinary annuity for

A beginning accounting student comes to you with the following question, "What is the time value of money and does it relate to interest?" Required: Explain the two concepts and how they are related.

The interest that accrues on both the principal and the past unpaid accrued interest is called compound interest.

Interest compounded quarterly on a $100,000 principal amount at 12% for one year is

On April 1, 2014, Meyers Company purchased a bulldozer. Payment, totaling $70,000, is not due until April 1, 2016. Assuming interest at a 12% annual rate, Meyers should debit Machinery on April 1, 2014, in the amount of

The formula for the future value of a single amount at compound interest is

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 for the future value of an ordinary annuity of any amount is: $F V _ { o } = C \times \left[ \frac { ( 1 + n ) ^ { i } - 1 } { i } \right]$

The formula to calculate a present value of a deferred annuity is: PV_deferred = C x (Converted Factor for Present Value of Deferred Annuity of 1)