Exam 14: Time Value of Money

Parks Blair invested $5,000 at 8% annual interest and left the money invested without withdrawing any of the interest for 15 years. At the end of the 15 years, Parks decided to withdraw the accumulated amount of money. Parks has found the following values in various tables related to the time value of money. Which factor would he use to compute the amount he would withdraw, assuming that the investment earns interest compounded annually?

The Fair Value Adjustment account

FTX Company owns 10% interest in the stock of Zip Corporation. During the year, Zip pays $4,000 in dividends to FTX, and reports a net loss of $100,000. FTX Company's investment in Zip will affect FTX net income by a

At January 1, 2014, the available-for-sale securities portfolio held by Darma Corporation consisted of the following investments: 1. 2,500 shares of H2 common stock purchased for $43 per share. 2. 1,500 shares of Krypto common stock purchased for $50 per share. At December 31, 2014, the fair values per share were H2 $36 and Krypto $54. Instructions (a) Prepare a schedule showing the cost and fair value of the portfolio at December 31, 2014. (b) Prepare the adjusting entry to report the portfolio at fair value at December 31, 2014.

The future value of 1 factor will always be

Compound interest uses the accumulated balance-principal plus interest to date-at each year-end to compute interest in the succeeding year.

In computing the future value of an annuity, it is necessary to know the interest rate, the number of compounding periods, and the amount of the periodic payments or receipts.

Cedar Co. purchased 120, 6% LKN Company bonds for $120,000 cash. Interest is payable semiannually on July 1 and January 1. If 60 of the securities are sold July 1 for $61,500 the entry would include a credit to Gain on Sale of Debt Investments of

If the single amount of $12,500 is to be received in 2 years and discounted at 11%, its present value is

A stock investment classified as trading securities is purchased for $73,500. At year end, when the market value of the stock is $65,000, the adjusting entry includes a

The cost method of accounting for investments in stock should be used when the investment is

La Bouisse Inc. obtained significant influence over E-Stock Corporation by buying 40% of E-Stock 30,000 outstanding shares common stock at a total cost of $11 per share on January 1, 2014. On June 15 E-Stock declared and paid a cash dividend of $32,000. On December 31 E-Stock reported a net income of $120,000 for the year. Instructions Prepare all the necessary journal entries for 2014 for La Bouisse Inc.

On January 1, Vega Company purchased as an investment a $1,000, 8% bond for $1,000. The bond pays interest on January 1 and July 1. The bond is sold on October 1 for $1,080 plus accrued interest. Interest has not been accrued since the last interest payment date. What is the entry to record the cash proceeds at the time the bond is sold?

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

If $10,000 is put in a savings account paying interest of 4% compounded annually, what amount will be in the account at the end of 5 years?

When a company owns more than 50% of the common stock of another company

Unrealized gains and losses on available-for-sale securities are reported on the income statement.

Mazzeo Company acquires 80 Dodd's 10%, 5 year, $1,000 bonds on January 1, 2014 for $80,000. Assume Dodd's pays interest semiannually and the July 1 entry was done correctly. Mazzeo's journal entry at December 31, 2014 would include a credit to

If Jane Key invests $15,501.28 now and she will receive $40,000 at the end of 11 years, what annual rate of interest will she be earning on her investment?

McComb Inc. earns $900,000 and pays cash dividends for $300,000 during 2014. SFXl Corporation owns 70,000 of the 210,000 outstanding shares of McComb. How much revenue from investment should Cornwell report in 2014?