Exam 19: Appendix A: Accounting and the Time Value of Money

Items 52 through 55 apply to the appropriate use of present value tables. Given below are the present value factors for $1.00 discounted at 10% for one to five periods. Each of the items 52 to 55 is based on 10% interest compounded annually. -What is the present value today of $6,000 to be received six years from today?

On January 15, 2008, Flynn Corp. adopted a plan to accumulate funds for environmental improvements beginning July 1, 2012, at an estimated cost of $4,000,000. Flynn plans to make four equal annual deposits in a fund that will earn interest at 10% compounded annually. The first deposit was made on July 1, 2008. Future value factors are as follows: Flynn should make four annual deposits of

Find the present value of an investment in plant and equipment if it is expected to provide annual earnings of $21,000 for 15 years and to have a resale value of $40,000 at the end of that period. Assume a 10% rate and earnings at year end. The present value of 1 at 10% for 15 periods is .23939. The present value of an ordinary annuity at 10% for 15 periods is 7.60608. The future value of 1 at 10% for 15 periods is 4.17725.

How much must be invested now to receive $10,000 for 15 years if the first $10,000 is received today and the rate is 9%?

On June 1, 2008, Walsh Company sold some equipment to Fischer Company. The two companies entered into an installment sales contract at a rate of 8%. The contract required 8 equal annual payments with the first payment due on June 1, 2008. What type of compound interest table is appropriate for this situation?

Jensen Company will invest $200,000 today. The investment will earn 6% for 5 years, with no funds withdrawn. In 5 years, the amount in the investment fund is

Items 48 through 51 apply to the appropriate use of interest tables. Given below are the future value factors for 1 at 8% for one to five periods. Each of the items 48 to 51 is based on 8% interest compounded annually. -If $4,000 is put in a savings account today, what amount will be available six years from now?

If the interest rate is 10%, the factor for the future value of annuity due of 1 for n = 5, i = 10% is equal to the factor for the future value of an ordinary annuity of 1 for n = 5, i = 10%

Ed Sloan wants to withdraw $20,000 (including principal) from an investment fund at the end of each year for five years. How should he compute his required initial investment at the beginning of the first year if the fund earns 10% compounded annually?

Items 52 through 55 apply to the appropriate use of present value tables. Given below are the present value factors for $1.00 discounted at 10% for one to five periods. Each of the items 52 to 55 is based on 10% interest compounded annually. -If an individual put $4,000 in a savings account today, what amount of cash would be available two years from today?

Schmitt Corporation will invest $10,000 every December 31st for the next six years (2008- 2013). If Schmitt will earn 12% on the investment, what amount will be in the investment fund on December 31, 2013?

Linton Corporation will invest $10,000 every January 1st for the next six years (2008 - 2013). If Linton will earn 12% on the investment, what amount will be in the investment fund on December 31, 2013?

Items 48 through 51 apply to the appropriate use of interest tables. Given below are the future value factors for 1 at 8% for one to five periods. Each of the items 48 to 51 is based on 8% interest compounded annually. -What amount will be in a bank account three years from now if $6,000 is invested each year for four years with the first investment to be made today?

On January 1, 2008, Lex Co. sold goods to Eaton Company. Eaton signed a noninterest-bearing note requiring payment of $80,000 annually for seven years. The first payment was made on January 1, 2008. The prevailing rate of interest for this type of note at date of issuance was 10%. Information on present value factors is as follows: Lex should record sales revenue in January 2008 of

Which of the following is false?

On January 1, 2007, Carly Company decided to begin accumulating a fund for asset replacement five years later. The company plans to make five annual deposits of $50,000 at 9% each January 1 beginning in 2007. What will be the balance in the fund, within $10, on January 1, 2012 (one year after the last deposit)? The following 9% interest factors may be used

Items 48 through 51 apply to the appropriate use of interest tables. Given below are the future value factors for 1 at 8% for one to five periods. Each of the items 48 to 51 is based on 8% interest compounded annually. -If $3,000 is put in a savings account today, what amount will be available three years from today?

Jasper Company will invest $300,000 today. The investment will earn 6% for 5 years, with no funds withdrawn. In 5 years, the amount in the investment fund is

On December 1, 2008, Michael Hess Company sold some machinery to Shawn Keling Company. The two companies entered into an installment sales contract at a predetermined interest rate. The contract required four equal annual payments with the first payment due on December 1, 2008, the date of the sale. What present value concept is appropriate for this situation?

If an annuity due and an ordinary annuity have the same number of equal payments and the same interest rates, then