Question 1

If a savings account pays interest at 4% compounded quarterly, then the amount of $1 left on deposit for 5 years would be found in a table using

Accepted Answer

A)  5 periods at 4%. 
B)  5 periods at 1%. 
C)  20 periods at 4%. 
D)  20 periods at 1%. 
A)  5 periods at 4%. 
B)  5 periods at 1%. 
C)  20 periods at 4%. 
D)  20 periods at 1%.

Question 2

On January 1, 2014, Haley Co. issued ten-year bonds with a face amount of $4,000,000 and a stated interest rate of 8% payable annually on January 1. The bonds were priced to yield 10%. Present value factors are as follows:   The total issue price of the bonds was

Accepted Answer

A)  $4,000,000. 
B)  $3,920,000. 
C)  $3,680,000. 
D)  $3,510,400. 
A)  $4,000,000. 
B)  $3,920,000. 
C)  $3,680,000. 
D)  $3,510,400.

Question 3

Which factor would be greater - the present value of $1 for 10 periods at 8% per period or the future value of $1 for 10 periods at 8% per period?

Accepted Answer

A)  Present value of $1 for 10 periods at 8% per period. 
B)  Future value of $1 for 10 periods at 8% per period. 
C)  The factors are the same. 
D)  Need more information. 
A)  Present value of $1 for 10 periods at 8% per period. 
B)  Future value of $1 for 10 periods at 8% per period. 
C)  The factors are the same. 
D)  Need more information.

Question 4

For which of the following transactions would the use of the present value of an ordinary annuity concept be appropriate in calculating the present value of the asset obtained or the liability owed at the date of incurrence?

Accepted Answer

A)  A capital lease is entered into with the initial lease payment due one month subsequent to the signing of the lease agreement. 
B)  A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement. 
C)  A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 7%. 
D)  A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 9%. 
A)  A capital lease is entered into with the initial lease payment due one month subsequent to the signing of the lease agreement. 
B)  A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement. 
C)  A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 7%. 
D)  A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 9%.

Question 5

The rents that comprise an annuity due earn no interest during the period in which they are originally deposited.

Accepted Answer

A) True 
 B)False

Question 6

Find the present value of an investment in plant and equipment if it is expected to provide annual earnings of $39,000 for 15 years and to have a resale value of $75,000 at the end of that period. Assume a 10% rate and earnings at year end. The present value of 1 at 10% for 15 periods is .23939. The present value of an ordinary annuity at 10% for 15 periods is 7.60608. The future value of 1 at 10% for 15 periods is 4.17725.

Accepted Answer

A)  $296,637 
B)  $314,592 
C)  $371,637 
D)  $602,955 
A)  $296,637 
B)  $314,592 
C)  $371,637 
D)  $602,955

Question 7

Which of the following tables would show the smallest factor for an interest rate of 10% for six periods?

Accepted Answer

A)  Future value of an ordinary annuity of 1 
B)  Present value of an ordinary annuity of 1 
C)  Future value of an annuity due of 1 
D)  Present value of an annuity due of 1 
A)  Future value of an ordinary annuity of 1 
B)  Present value of an ordinary annuity of 1 
C)  Future value of an annuity due of 1 
D)  Present value of an annuity due of 1

Question 8

Angie invested $150,000 she received from her grandmother today in a fund that is expected to earn 10% per annum. To what amount should the investment grow in five years if interest is compounded semi-annually?

Accepted Answer

A)  $232,701. 
B)  $241,575. 
C)  $244,335. 
D)  $265,734. 
A)  $232,701. 
B)  $241,575. 
C)  $244,335. 
D)  $265,734.

Question 9

Items 69 through 72 apply to the appropriate use of present value tables. Given below are the present value factors for $1.00 discounted at 10% for one to five periods. Each of the items 69 to 72 is based on 10% interest compounded annually.
  
-What amount should an individual have in a bank account today before withdrawal if $7,000 is needed each year for four years with the first withdrawal to be made today and each subsequent withdrawal at one-year intervals? (The balance in the bank account should be zero after the fourth withdrawal.)

Accepted Answer

A)  $7,000 + ($7,000 × 0.909) + ($7,000 × 0.826) + ($7,000 × 0.751) 
B)  $7,000 ÷ 0.683 × 4 
C)  ($7,000 × 0.909) + ($7,000 × 0.826) + ($7,000 × 0.751) + ($7,000 × 0.683) 
D)  $7,000 ÷ 0.909 × 4 
A)  $7,000 + ($7,000 × 0.909) + ($7,000 × 0.826) + ($7,000 × 0.751) 
B)  $7,000 ÷ 0.683 × 4 
C)  ($7,000 × 0.909) + ($7,000 × 0.826) + ($7,000 × 0.751) + ($7,000 × 0.683) 
D)  $7,000 ÷ 0.909 × 4

Question 10

At the end of two years, what will be the balance in a savings account paying 6% annually if $15,000 is deposited today? The future value of one at 6% for one period is 1.06.

Accepted Answer

A)  $15,000 
B)  $15,900 
C)  $16,800 
D)  $16,854 
A)  $15,000 
B)  $15,900 
C)  $16,800 
D)  $16,854

Question 11

Present value of an investment in equipment. (Tables needed.)
Find the present value of an investment in equipment if it is expected to provide annual savings of $30,000 for 10 years and to have a resale value of $75,000 at the end of that period. Assume an interest rate of 9% and that savings are realized at year end.

Accepted Answer

The answer of Present value of an investment in equipment....

Question 12

Items 69 through 72 apply to the appropriate use of present value tables. Given below are the present value factors for $1.00 discounted at 10% for one to five periods. Each of the items 69 to 72 is based on 10% interest compounded annually.
  
-What amount should be deposited in a bank today to grow to $6,000 three years from today?

Accepted Answer

A)  $6,000 ÷ 0.751 
B)  $6,000 × 0.909 × 3 
C)  ($6,000 × 0.909) + ($6,000 × 0.826) + ($6,000 × 0.751) 
D)  $6,000 × 0.751 
A)  $6,000 ÷ 0.751 
B)  $6,000 × 0.909 × 3 
C)  ($6,000 × 0.909) + ($6,000 × 0.826) + ($6,000 × 0.751) 
D)  $6,000 × 0.751

Question 13

Calculate market price of a bond.
On January 1, 2014 Lance Co. issued five-year bonds with a face value of $700,000 and a stated interest rate of 12% payable semiannually on July 1 and January 1. The bonds were sold to yield 10%. Present value table factors are:   Calculate the issue price of the bonds.

Accepted Answer

The answer of Calculate market price of a bond.
On January...

Question 14

Which of the following tables would show the largest value for an interest rate of 10% for 8 periods?

Accepted Answer

A)  Future amount of 1 table. 
B)  Present value of 1 table. 
C)  Future amount of an ordinary annuity of 1 table. 
D)  Present value of an ordinary annuity of 1 table. 
A)  Future amount of 1 table. 
B)  Present value of 1 table. 
C)  Future amount of an ordinary annuity of 1 table. 
D)  Present value of an ordinary annuity of 1 table.

Question 15

Items 65 through 68 apply to the appropriate use of interest tables. Given below are the future value factors for 1 at 8% for one to five periods. Each of the items 65 to 68 is based on 8% interest compounded annually.
  
-If $5,000 is deposited in a savings account today, what amount will be available three years from today?

Accepted Answer

A)  $5,000 ÷ 1.260 
B)  $5,000 × 1.260 
C)  $5,000 × 1.080 × 3 
D)  ($5,000 × 1.080) + ($5,000 × 1.166) + ($5,000 × 1.260) 
A)  $5,000 ÷ 1.260 
B)  $5,000 × 1.260 
C)  $5,000 × 1.080 × 3 
D)  ($5,000 × 1.080) + ($5,000 × 1.166) + ($5,000 × 1.260)

Question 16

The future value of an annuity due factor is found by multiplying the future value of an ordinary annuity factor by 1 minus the interest rate.

Accepted Answer

A) True 
 B)False

Question 17

If two annuities have the same number of rents with the same dollar amount, but one is an annuity due and one is an ordinary annuity, the present value of the annuity due will be greater than the present value of the ordinary annuity.

Accepted Answer

A) True 
 B)False

Question 18

Present value is the value now of a future sum or sums discounted assuming compound interest.

Accepted Answer

A) True 
 B)False

Question 19

Jenks Company financed the purchase of a machine by making payments of $20,000 at the end of each of five years. The appropriate rate of interest was 8%. The future value of one for five periods at 8% is 1.46933. The future value of an ordinary annuity for five periods at 8% is 5.8666. The present value of an ordinary annuity for five periods at 8% is 3.99271. What was the cost of the machine to Jenks?

Accepted Answer

A)  $29,588 
B)  $79,854 
C)  $100,000 
D)  $117,334 
A)  $29,588 
B)  $79,854 
C)  $100,000 
D)  $117,334

Question 20

Pearson Corporation makes an investment today (January 1, 2014). They will receive $9,000 every December 31st for the next six years (2014 - 2019). If Pearson wants to earn 12% on the investment, what is the most they should invest on January 1, 2014?

Accepted Answer

A)  $37,003. 
B)  $41,443. 
C)  $73,036. 
D)  $81,801. 
A)  $37,003. 
B)  $41,443. 
C)  $73,036. 
D)  $81,801.

If a savings account pays interest at 4% compounded quarterly, then the amount of $1 left on deposit for 5 years would be found in a table using

On January 1, 2014, Haley Co. issued ten-year bonds with a face amount of $4,000,000 and a stated interest rate of 8% payable annually on January 1. The bonds were priced to yield 10%. Present value factors are as follows: The total issue price of the bonds was

Which factor would be greater - the present value of $1 for 10 periods at 8% per period or the future value of $1 for 10 periods at 8% per period?

For which of the following transactions would the use of the present value of an ordinary annuity concept be appropriate in calculating the present value of the asset obtained or the liability owed at the date of incurrence?

The rents that comprise an annuity due earn no interest during the period in which they are originally deposited.

Which of the following tables would show the smallest factor for an interest rate of 10% for six periods?

Angie invested $150,000 she received from her grandmother today in a fund that is expected to earn 10% per annum. To what amount should the investment grow in five years if interest is compounded semi-annually?

At the end of two years, what will be the balance in a savings account paying 6% annually if $15,000 is deposited today? The future value of one at 6% for one period is 1.06.

Which of the following tables would show the largest value for an interest rate of 10% for 8 periods?

The future value of an annuity due factor is found by multiplying the future value of an ordinary annuity factor by 1 minus the interest rate.

If two annuities have the same number of rents with the same dollar amount, but one is an annuity due and one is an ordinary annuity, the present value of the annuity due will be greater than the present value of the ordinary annuity.

Present value is the value now of a future sum or sums discounted assuming compound interest.

Pearson Corporation makes an investment today (January 1, 2014). They will receive $9,000 every December 31st for the next six years (2014 - 2019). If Pearson wants to earn 12% on the investment, what is the most they should invest on January 1, 2014?

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

Filters

Exam 6: Accounting and the Time Value of Money

If a savings account pays interest at 4% compounded quarterly, then the amount of $1 left on deposit for 5 years would be found in a table using

On January 1, 2014, Haley Co. issued ten-year bonds with a face amount of $4,000,000 and a stated interest rate of 8% payable annually on January 1. The bonds were priced to yield 10%. Present value factors are as follows: The total issue price of the bonds was

Which factor would be greater - the present value of $1 for 10 periods at 8% per period or the future value of $1 for 10 periods at 8% per period?

For which of the following transactions would the use of the present value of an ordinary annuity concept be appropriate in calculating the present value of the asset obtained or the liability owed at the date of incurrence?

The rents that comprise an annuity due earn no interest during the period in which they are originally deposited.

Which of the following tables would show the smallest factor for an interest rate of 10% for six periods?

Angie invested $150,000 she received from her grandmother today in a fund that is expected to earn 10% per annum. To what amount should the investment grow in five years if interest is compounded semi-annually?

At the end of two years, what will be the balance in a savings account paying 6% annually if $15,000 is deposited today? The future value of one at 6% for one period is 1.06.

Which of the following tables would show the largest value for an interest rate of 10% for 8 periods?

The future value of an annuity due factor is found by multiplying the future value of an ordinary annuity factor by 1 minus the interest rate.

If two annuities have the same number of rents with the same dollar amount, but one is an annuity due and one is an ordinary annuity, the present value of the annuity due will be greater than the present value of the ordinary annuity.

Present value is the value now of a future sum or sums discounted assuming compound interest.

Pearson Corporation makes an investment today (January 1, 2014). They will receive $9,000 every December 31st for the next six years (2014 - 2019). If Pearson wants to earn 12% on the investment, what is the most they should invest on January 1, 2014?

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

Filters