Exam 6: Accounting and the Time Value of Money

What is not a variable that is considered in interest computations?

Which of the following transactions would best use the present value of an annuity due of 1 table?

Use the following 8% interest factors for questions 102 through 105. -Korman Company wishes to accumulate $500,000 by May 1, 2022 by making 8 equal annual deposits beginning May 1, 2014 to a fund paying 8% interest compounded annually. What is the required amount of each deposit?

A machine is purchased by making payments of $8,000 at the beginning of each of the next five years. The interest rate was 10%. The future value of an ordinary annuity of 1 for five periods is 6.10510. The present value of an ordinary annuity of 1 for five periods is 3.79079. What was the cost of the machine?

Calculate market price of a bond. (Tables needed.) Determine the market price of a $500,000, ten-year, 10% (pays interest semiannually) bond issue sold to yield an effective rate of 12%.

Which of the following is false?

Lane Co. has a machine that cost $500,000. It is to be leased for 20 years with rent received at the beginning of each year. Lane wants a return of 10%. Calculate the amount of the annual rent.

The present value of an annuity due table is used when payments are made at the end of each period.

Sonata Corporation will receive $30,000 today (January 1, 2014), and also on each January 1st for the next five years (2015 - 2019). What is the present value of the six $30,000 receipts, assuming a 12% interest rate?

Present and future value concepts.On the right are six diagrams representing six different present and future value concepts stated on the left. Identify the diagrams with the concepts by writing the identifying letter of the diagram on the blank line at the left. Assume n = 4 and i = 8%.

Which table would show the largest factor for an interest rate of 8% for five periods?

An accountant wishes to find the present value of an annuity of $1 payable at the beginning of each period at 10% for eight periods. The accountant has only one present value table which shows the present value of an annuity of $1 payable at the end of each period. To compute the present value, the accountant would use the present value factor in the 10% column for

Which table would you use to determine how much you would need to have deposited three years ago at 10% compounded annually in order to have $1,000 today?

On January 1, 2014, Ott Co. sold goods to Flynn Company. Flynn signed a zero-interest-bearing note requiring payment of $150,000 annually for seven years. The first payment was made on January 1, 2014. The prevailing rate of interest for this type of note at date of issuance was 10%. Information on present value factors is as follows: Ott should record sales revenue in January 2014 of

The time value of money refers to the fact that a dollar received today is worth less than a dollar promised at some time in the future.

The present value of an ordinary annuity is the present value of a series of equal rents withdrawn at equal intervals.

Which of the following statements is false?

Deferred annuity. Carey Company owns a plot of land on which buried toxic wastes have been discovered. Since it will require several years and a considerable sum of money before the property is fully detoxified and capable of generating revenues, Carey wishes to sell the land now. It has located two potential buyers: Buyer A, who is willing to pay $575,000 for the land now, and Buyer B, who is willing to make 20 annual payments of $90,000 each, with the first payment to be made 5 years from today. Assuming that the appropriate rate of interest is 9%, to whom should Carey sell the land? Show calculations.

Under IAS 37 and the establishment of estimate provisions, discounting is required where the time value of money is material.

The figure .94232 is taken from the column marked 2% and the row marked three periods in a certain interest table. From what interest table is this figure taken?