Question 1

Interest is the difference between the amount borrowed and the principal.

Accepted Answer

A) True 
 B)False  False

Question 2

In present value calculations, the process of determining the present value is called

Accepted Answer

A) allocating. 
B) pricing. 
C) negotiating. 
D) discounting. 
A) allocating. 
B) pricing. 
C) negotiating. 
D) discounting. D

Question 3

When the periodic payments are not equal in each period, the future value can be computed by using a future value of an annuity table.

Accepted Answer

A) True 
 B)False  False

Question 4

The factor 1.0609 is taken from the 3% column and 2 periods row in a certain table.From what table is this factor taken?

Accepted Answer

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

Question 5

Compound interest is computed on the principal and any interest earned that has not been paid or received.

Accepted Answer

A) True 
 B)False

Question 6

Present value is based on

Accepted Answer

A) the dollar amount to be received. 
B) the length of time until the amount is received. 
C) the interest rate. 
D) All of these answers are correct. 
A) the dollar amount to be received. 
B) the length of time until the amount is received. 
C) the interest rate. 
D) All of these answers are correct.

Question 7

All of the following are necessary to compute the future value of a single amount except the

Accepted Answer

A) interest rate. 
B) number of periods. 
C) principal. 
D) maturity value. 
A) interest rate. 
B) number of periods. 
C) principal. 
D) maturity value.

Question 8

Suzy Douglas has been offered the opportunity of investing $73,540 now.The investment will earn 8% per year and at the end of its life will return $200,000 to Suzy.How many years must Suzy wait to receive the $200,000?

Accepted Answer

A) 10 
B) 11 
C) 12 
D) 13 
A) 10 
B) 11 
C) 12 
D) 13

Question 9

Many companies calculate the future value of the cash flows involved in an investment in evaluating long-term capital investments.

Accepted Answer

A) True 
 B)False

Question 10

In order to compute the present value of an annuity, it is necessary to know the
1.	discount rate.
2.	number of discount periods and the amount of the periodic payments or receipts.

Accepted Answer

A) 1 
B) 2 
C) both 1 and 2 
D) something in addition to 1 and 2 
A) 1 
B) 2 
C) both 1 and 2 
D) something in addition to 1 and 2

Question 11

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

Accepted Answer

A) The determination of the market price of a bond. 
B) The determination of the declining-balance depreciation expense. 
C) The determination of the amount to report for long-term notes payable. 
D) The determination of the amount to report for lease liability. 
A) The determination of the market price of a bond. 
B) The determination of the declining-balance depreciation expense. 
C) The determination of the amount to report for long-term notes payable. 
D) The determination of the amount to report for lease liability.

Question 12

Perdue Company has purchased equipment that requires annual payments of $30,000 to be paid at the end of each of the next 6 years.The appropriate discount rate is 12%.What amount will be used to record the equipment?

Accepted Answer

A) $180,000 
B) $123,342 
C) $165,772 
D) $115,650 
A) $180,000 
B) $123,342 
C) $165,772 
D) $115,650

Question 13

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

Accepted Answer

A) increased. 
B) decreased. 
C) not changed. 
D) equal to the stated rate of interest. 
A) increased. 
B) decreased. 
C) not changed. 
D) equal to the stated rate of interest.

Question 14

If Sloane Joyner invests $10,514.81 now and she will receive $30,000 at the end of 11 years, what annual rate of interest will she be earning on her investment?

Accepted Answer

A) 8% 
B) 8.5% 
C) 9% 
D) 10% 
A) 8% 
B) 8.5% 
C) 9% 
D) 10%

Question 15

The process of determining the present value is referred to as discounting the future amount.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not necessary to know in computing the future value of an annuity?

Accepted Answer

A) Amount of the periodic payments 
B) Interest rate 
C) Number of compounding periods 
D) Year the payments begin 
A) Amount of the periodic payments 
B) Interest rate 
C) Number of compounding periods 
D) Year the payments begin

Question 17

The decision to make long-term capital investments is best evaluated using discounting techniques that recognize the time value of money.

Accepted Answer

A) True 
 B)False

Question 18

A higher discount rate produces a higher present value.

Accepted Answer

A) True 
 B)False

Question 19

The future value of 1 factor will always be

Accepted Answer

A) equal to 1. 
B) greater than 1. 
C) less than 1. 
D) equal to the interest rate. 
A) equal to 1. 
B) greater than 1. 
C) less than 1. 
D) equal to the interest rate.

Question 20

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?

Accepted Answer

A) $14,852 
B) $13,125 
C) $12,750 
D) $13,044 
A) $14,852 
B) $13,125 
C) $12,750 
D) $13,044

Interest is the difference between the amount borrowed and the principal.

In present value calculations, the process of determining the present value is called

When the periodic payments are not equal in each period, the future value can be computed by using a future value of an annuity table.

The factor 1.0609 is taken from the 3% column and 2 periods row in a certain table.From what table is this factor taken?

Compound interest is computed on the principal and any interest earned that has not been paid or received.

Present value is based on

All of the following are necessary to compute the future value of a single amount except the

Suzy Douglas has been offered the opportunity of investing $73,540 now.The investment will earn 8% per year and at the end of its life will return $200,000 to Suzy.How many years must Suzy wait to receive the $200,000?

Many companies calculate the future value of the cash flows involved in an investment in evaluating long-term capital investments.

In order to compute the present value of an annuity, it is necessary to know the 1. discount rate. 2. number of discount periods and the amount of the periodic payments or receipts.

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

Perdue Company has purchased equipment that requires annual payments of $30,000 to be paid at the end of each of the next 6 years.The appropriate discount rate is 12%.What amount will be used to record the equipment?

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

If Sloane Joyner invests $10,514.81 now and she will receive $30,000 at the end of 11 years, what annual rate of interest will she be earning on her investment?

The process of determining the present value is referred to as discounting the future amount.

Which of the following is not necessary to know in computing the future value of an annuity?

The decision to make long-term capital investments is best evaluated using discounting techniques that recognize the time value of money.

A higher discount rate produces a higher present value.

The future value of 1 factor will always be

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?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Filters

Exam 15: Time Value of Money

Interest is the difference between the amount borrowed and the principal.

In present value calculations, the process of determining the present value is called

When the periodic payments are not equal in each period, the future value can be computed by using a future value of an annuity table.

The factor 1.0609 is taken from the 3% column and 2 periods row in a certain table.From what table is this factor taken?

Compound interest is computed on the principal and any interest earned that has not been paid or received.

Present value is based on

All of the following are necessary to compute the future value of a single amount except the

Suzy Douglas has been offered the opportunity of investing $73,540 now.The investment will earn 8% per year and at the end of its life will return $200,000 to Suzy.How many years must Suzy wait to receive the $200,000?

Many companies calculate the future value of the cash flows involved in an investment in evaluating long-term capital investments.

In order to compute the present value of an annuity, it is necessary to know the 1. discount rate. 2. number of discount periods and the amount of the periodic payments or receipts.

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

Perdue Company has purchased equipment that requires annual payments of $30,000 to be paid at the end of each of the next 6 years.The appropriate discount rate is 12%.What amount will be used to record the equipment?

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

If Sloane Joyner invests $10,514.81 now and she will receive $30,000 at the end of 11 years, what annual rate of interest will she be earning on her investment?

The process of determining the present value is referred to as discounting the future amount.

Which of the following is not necessary to know in computing the future value of an annuity?

The decision to make long-term capital investments is best evaluated using discounting techniques that recognize the time value of money.

A higher discount rate produces a higher present value.

The future value of 1 factor will always be

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?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Filters