Exam 24: Time Value of Money Module

Millie Company borrowed $550, 000 on December 31, 2010.The loan will be paid with six equal annual payments of $115, 388, beginning on December 31, 2011.The rate of interest compounded annually for the loan is

Interest calculated on the original principal regardless of the number of time periods that have passed or the amount of interest that has been paid or accrued in the past is

On July 7, 2010, Luke Company sold some machinery to Jones Construction Company.The sales contract requires Jones to pay five equal annual payments of $70, 000 each, beginning on July 7, 2010.What present value concept is appropriate for this situation?

Pricilla is considering buying a lottery ticket.She has to decide whether she wants to receive an immediate lump sum payment based upon $50, 000, 000 or 20 equal annual payments of $2, 500, 000.The annual payments begin the day after the lottery is won. Below are compound interest amounts for 10% and 20 periods taken from the appropriate tables. Future value of a lump sum 6.723 Present value of a lump sum .149 Future value of an ordinary annuity 57.275 Present value of an ordinary annuity 8.514 Present value of an annuity due 9.365 Required: Compute the present value of the amounts to be received under each alternative plan.

Paul's Painting Co.acquired a new $800, 000 press on April 1, 2010.Paul's will make six equal payments based upon 8% compound interest, starting on March 31, 2011.How much will each payment be?

On April 1, 2010, the Resendez Company purchased a bulldozer.Payment, totaling $70, 000, is not due until April 1, 2012.Assuming interest at a 12% annual rate, Resendez should debit Machinery on April 1, 2010, in the amount of

On January 2, 2010, Claudia Company inherited a trust fund that she could use for college tuition.Claudia hopes to make five equal withdrawals of $40, 000 from the fund that will earn 10% compounded annually.The first withdrawal will be made on January 2, 2011.How much does she need to have invested in the fund on January 2, 2010, to be able to withdraw the needed amounts each year?

Using the compound interest tables, solve each of the following questions. Required:

If $10, 000 is invested on December 31, 2008, to earn compound interest semiannually, and if the future value on December 31, 2018, is $38, 697, what is the semiannual interest rate on the investment?

In order to measure the carrying value of investments in bonds, which of the following time value of money concepts is used?

The future amount of an annuity due is determined one period

On January 31, 2010, Richie Company acquired a new machine by paying $40, 000 cash and agreeing to pay $20, 000 annually for three years, beginning on January 31, 2011.Assuming an interest rate of 10%, Richie should record the acquisition cost of the machine on January 31, 2010, at