Exam 14: Time Value of Money

Cost and fair value data for the trading securities of Beltway Company at December 31, 2014, are $100,000 and $84,000, respectively. Which of the following correctly presents the adjusting journal entry to record the securities at fair value?

If a debt investment is sold, the investment account is

Using the cost method of accounting for a stock investment, the journal entry to record the receipt of dividends involves a credit to Dividend Revenue.

When the periodic payments are not equal in each period, the future value can be computed by using a future value of an annuity of 1 table.

On January 1, Waverly Company purchased as an investment a $1,000, 6% bond for $1,000. The bond pays interest on January 1 and July 1. What is the entry to record the interest accrual on December 31?

he Chocolate Tree Company receives a $150,000, 6-year note bearing interest of 6% (paid annually) from a customer at a time when the discount rate is 8%. What is the present value of the note received by The Chocolate Tree?

Suppose you have a winning lottery ticket and you are given the option of accepting $7,000,000 three years from now or taking the present value of the $7,000,000 now. The sponsor of the prize uses a 6% discount rate. If you elect to receive the present value of the prize now, the amount you will receive is

ewis Company earns 12% on an investment that will return $500,000 eleven years from now. What is the amount that Lewis Company should invest now to earn this rate of return?

If the single amount of $5,000 is to be received in 3 years and discounted at 6%, its present value is

When determining the proceeds received when issuing a bond, the factor applied to the amount of the bond principal is determined from the table of the

Short-term investments are securities that are readily marketable and intended to be converted into cash within the next

If the equity method is being used, cash dividends received

Unrealized gains or losses on available-for-sale securities are reported where in the financial statements?

Koppernaes Corporation earns 12% on an investment that will return $1,350,000, 7 years from now. Below is some of the time value of money information that Koppernaes has compiled that might help in planning compounded interest decisions. To the closest dollar, what is the amount Koppernaes should invest now to earn this rate of return?

Mango Madness Company is considering purchasing equipment. The equipment will produce the following cash flows: Mango Madness requires a minimum rate of return of 10%. What is the maximum price Mango Madness should pay for this equipment?

When investing excess cash for short periods of time, corporations invest in

Pension funds and mutual funds are corporations that regularly invest for strategic reasons.

Under the cost method of accounting for dividends

The amount you must deposit now in your savings account paying 6% interest, in order to accumulate $20,000 for a down payment 5 years from now on a new Ferrari 458 is

Vangaurd Co. purchased 50, 6% McLaughlin Company bonds for $50,000 cash. Interest is payable semiannually on July 1 and January 1. The entry to record the purchase would include debit to