Exam 14: Time Value of Money

oub Company issued $4,000,000, 10-year bonds and agreed to make annual deposits of $303,500 to a fund. The deposits are made at the end of each year to a fund paying 6% interest compounded annually. What amount will be in the fund at the end of the 10 years?

The receipt of dividends on an investment affects the Stock Investment account when which of the following methods is used?

Mergenthaler Company has just purchased machinery that requires annual payments of $50,000 to be paid at the end of each of the next 4 years. The appropriate discount rate is 15%. What is the present value of the payments?

The present value of a bond is a function of two variables: (1) the payment amounts and (2) the discount rate.

Patterson Company is about to issue $8,000,000 of 10-year bonds paying an 8% interest rate with interest payable semiannually. The discount rate for such securities is 10%. Below are time value of money factors that Patterson uses to calculate compounded interest. To the closest dollar, how much can Patterson expect to receive for the sale of these bonds?

wen and Steve Jones Jeter invested $10,000 in a savings account paying 4% annual interest when their daughter, Larrisa was born. They also deposited $5,000 on each of her birthdays until she was 18 (including her 18th birthday). How much was in the savings account on her 18th birthday (after the last deposit)?

What is the present value of $32,000 due 7 years from now, discounted at 8%? (b) What is the present value of $70,000 due 5 years from now, discounted at 15%?

If the equity method is being used, the Revenue from Investment in Stock account is

Under the equity method the investor records a proportionate share of the investee's income in the year when it is earned.

If an investor owns less than 20% of the common stock of another corporation as an investment

The present value is based on two variables-the dollar amount to be received and the length of time until the amount is received.

What are the reasons that corporations invest in securities?

In accordance with the historical cost principle, the cost of debt investments includes brokerage fees and accrued interest.

Valente Company is about to issue $3,000,000 of 5-year bonds, with a contract rate of interest of 10%, payable semiannually. The discount rate for such securities is 8%. How much can Valente expect to receive from the sale of these bonds?

A decline in the fair value of a trading security is recorded by debiting an unrealized loss account and crediting the Fair Value Adjustment account.

eaufort Company issued $400,000, 10%, 2-year bonds that pay interest semiannually. Compute the amount at which the bonds would sell if investors required a rate of return of 8%.

On January 1, 2014, the LaRoche Company purchased at face value, a $1,000, 4%, bond that pays interest on January 1 and July 1. LaRoche Company has a calendar year end. The entry for the receipt of interest on July 1, 2014, is

All of the following statements about financial statement gains and losses on investments are true except

Ppalachian Company is considering purchasing equipment. The equipment will produce the following cash flows: Year 1, $50,000; Year 2, $60,000; Year 3, $75,000. Appalachian requires a minimum rate of return of 10%. What is the maximum price Appalachian should pay for this equipment?

At the end of its first year, the trading securities portfolio consisted of the following common stocks. The unrealized loss to be recognized under the fair value method is