Exam 15: Accounting Principles and Contingent Liabilities in Business Operations

Frostmore Company is considering investing in an annuity contract that will return $40,000 annually at the end of each year for 20 years. What amount should Frostmore pay for this investment if it earns an 8% return?

The present value of $10,000 to be received in 5 years will be smaller if the discount rate is

Pleasant Company has decided to begin accumulating a fund for plant expansion. The company deposited $80,000 in a fund on January 2, 2010. Pleasant will also deposit $40,000 annually at the end of each year, starting in 2010. The fund pays interest at 4% compounded annually. What is the balance of the fund at the end of 2014 (after the 2014 deposit)?

Rob Honda plans to buy a home and can deposit $15,000 for the purchase today. If the annual interest rate is 8%, how much can Rob expect to have for a down payment in 5 years?

Flower Company is considering an investment which will return a lump sum of $2,500,000 six years from now. What amount should Flower Company pay for this investment to earn an 11% return?

Present value is based on

A lease may be classified as an ______________ lease or as a ____________ lease.

Which of the following accounting problems does not involve a present value calculation?

If you are able to earn an 8% rate of return, what amount would you need to invest to have $30,000 one year from now?

Proving the equality of the totals in the columns of multiple-column special journals is called

The amount you must deposit now in your savings account, paying 5% interest, in order to accumulate $10,000 for your first tuition payment when you start college in 3 years is

If you are able to earn a 15% rate of return, what amount would you need to invest to have $15,000 one year from now?

Hutton Cape Company, which prepares annual financial statements, is preparing adjusting entries on December 31. Analysis indicates the following: 1. The company is the defendant in an employee discrimination lawsuit involving $50,000 of damages. Legal counsel believes it is unlikely that the company will have to pay any damages. 2. Employees are entitled to one day's vacation for each month worked. The company employs 50 people who earn $120 per day and 30 who earn $160 per day. All employees worked the entire year. 3. The company is a defendant in a $500,000 product liability lawsuit. Legal counsel believes that the company probably will have to pay the amount requested. 4. The company has a defined-benefit pension plan in which total pension expense for December is $50,000. The company funds one half of the expense and records a liability or the balance due. Instructions Prepare any adjusting entries necessary at the end of the year.

DMV leases a building for 20 years. The lease requires 20 annual payments of $12,000 each, with the first payment due immediately. The interest rate in the lease is 10%. What is the present value of the cost of leasing the building?

The following payroll liability accounts are included in the ledger of Clementine Company on January 1, 2014: FICA Taxes Payable \ 1,600 Federal Income Taxes Payable 4,000 State Income Taxes Payable 665 Federal Unemployment Taxes Payable 175 State Unemployment Taxes Payable 1,190 Union Dues Payable 400 Health Insurance Payable 5,000 U.S. Savings Bonds Payable 1,000 In January, the following transactions occurred: Jan. 9 Sent a check for $5,000 to Blue Cross and Blue Shield. 11 Deposited a check for $5,600 in Federal Reserve Bank for FICA taxes and federal income taxes withheld. 14 Sent a check for $400 to the union treasurer for union dues. 18 Paid state income taxes withheld from employees. 21 Paid state and federal unemployment taxes. 22 Purchased U.S. Savings Bonds for employees by writing a check for $1,000. Instructions Journalize the January transactions

An accounts receivable subsidiary ledger has all the detailed information about the cash sales to individual customers.

If a transaction cannot be recorded in a special journal, it is

Crossfooting a cash receipts journal means