Exam 6: Accounting and the Time Value of Money

On January 2, 2014, Wine Corporation wishes to issue $4,000,000 (par value) of its 8%, 10-year bonds. The bonds pay interest annually on January 1. The current yield rate on such bonds is 10%. Using the interest factors below, compute the amount that Wine will realize from the sale (issuance) of the bonds.

Bella requires $160,000 in four years to purchase a new home. What amount must be invested today in an investment that earns 6% interest, compounded annually?

Barber Company will receive $900,000 in 7 years. If the appropriate interest rate is 10%, the present value of the $900,000 receipt is

If you invest $50,000 to earn 8% interest, which of the following compounding approaches would return the lowest amount after one year?

Lucy and Fred want to begin saving for their baby's college education. They estimate that they will need $150,000 in eighteen years. If they are able to earn 6% per annum, how much must be deposited at the beginning of each of the next eighteen years to fund the education?

Ziggy is considering purchasing a new car. The cash purchase price for the car is $39,200. What is the annual interest rate if Ziggy is required to make annual payments of $9,100 at the end of the next five years?

Under IFRS, the discount rate should reflect risks for which future cash flow estimates have been adjusted.

On January 15, 2014, Dolan Corp. adopted a plan to accumulate funds for environmental improvements beginning July 1, 2018, at an estimated cost of $6,000,000. Dolan plans to make four equal annual deposits in a fund that will earn interest at 10% compounded annually. The first deposit was made on July 1, 2014. Future value factors are as follows: Dolan should make four annual deposits of

Annuity with change in interest rate. Jan Green established a savings account for her son's college education by making annual deposits of $9,000 at the beginning of each of six years to a savings account paying 8%. At the end of the sixth year, the account balance was transferred to a bank paying 10%, and annual deposits of $9,000 were made at the end of each year from the seventh through the tenth years. What was the account balance at the end of the tenth year?

Use the following 8% interest factors for questions 102 through 105. -What amount should be recorded as the cost of a machine purchased December 31, 2014, which is to be financed by making 8 annual payments of $9,000 each beginning December 31, 2015? The applicable interest rate is 8%.

The number of compounding periods will always be one less than the number of rents when computing the future value of an ordinary annuity.

Which of the following tables would show the smallest value for an interest rate of 5% for six periods?

Which of the following situations does not base an accounting measure on present values?

The future value of an ordinary annuity table is used when payments are invested at the beginning of each period.

Jane wants to set aside funds to take an around the world cruise in four years. Jane expects that she will need $12,000 for her dream vacation. If she is able to earn 8% per annum on an investment, how much will she need to set aside at the beginning of each year to accumulate sufficient funds?

Use the following 8% interest factors for questions 102 through 105. -If $9,000 is deposited annually starting on January 1, 2014 and it earns 8%, what will the balance be on December 31, 2021?

Mordica Company will receive $300,000 in 7 years. If the appropriate interest rate is 10%, the present value of the $300,000 receipt is

A series of equal receipts at equal intervals of time when each receipt is received at the beginning of each time period is called an

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 $6,000 is deposited in a savings account today, what amount will be available six years from now?

Which table would you use to determine how much must be deposited now in order to provide for 5 annual withdrawals at the beginning of each year, starting one year hence?