Question 1

How much must be deposited on January 1, 2007 in a savings account paying 6% annually in order to make annual withdrawals of $20,000 at the end of the years 2007 and 2008? The present value of one at 6% for one period is .9434.

Accepted Answer

A)  $36,668
B)  $37,740
C)  $40,000
D)  $17,800E) A) and C)
F) None of the above

Question 2

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?

Accepted Answer

A)  ($6,000 × 1.260)  + ($6,000 × 1.166)  + ($6,000 × 1.080)  + $6,000
B)  $6,000 × 1.360 × 4
C)  ($6,000 × 1.080)  + ($6,000 × 1.166)  + ($6,000 × 1.260)  + ($6,000 × 1.360) 
D)  $6,000 × 1.080 × 4E) None of the above
F) B) and D)

Question 3

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?

Accepted Answer

A)  $20,000 times the future value of a 5-year, 10% ordinary annuity of 1.
B)  $20,000 divided by the future value of a 5-year, 10% ordinary annuity of 1.
C)  $20,000 times the present value of a 5-year, 10% ordinary annuity of 1.
D)  $20,000 divided by the present value of a 5-year, 10% ordinary annuity of 1.E) B) and C)
F) All of the above

Question 4

Ann Ruth wants to invest a certain sum of money at the end of each year for five years.The investment will earn 6% compounded annually.At the end of five years, she will need a total of $40,000 accumulated.How should she compute her required annual invest-ment?

Accepted Answer

A)  $40,000 times the future value of a 5-year, 6% ordinary annuity of 1.
B)  $40,000 divided by the future value of a 5-year, 6% ordinary annuity of 1.
C)  $40,000 times the present value of a 5-year, 6% ordinary annuity of 1.
D)  $40,000 divided by the present value of a 5-year, 6% ordinary annuity of 1.E) A) and D)
F) A) and C)

Question 5

For which of the following transactions would the use of the present value of an ordinary annuity concept be appropriate in calculating the present value of the asset obtained or the liability owed at the date of incurrence?

Accepted Answer

A)  A capital lease is entered into with the initial lease payment due one month subsequent to the signing of the lease agreement.
B)  A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement.
C)  A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 7%.
D)  A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 9%.E) C) and D)
F) B) and C)

Question 6

What amount should be deposited in a bank today to grow to $3,000 three years from today?

Accepted Answer

A)  $3,000 ÷ 0.751
B)  $3,000 × 0.909 × 3
C)  ($3,000 × 0.909)  + ($3,000 × 0.826)  + ($3,000 × 0.751) 
D)  $3,000 × 0.751E) C) and D)
F) B) and D)

Question 7

Compound interest uses the accumulated balance at each year end to compute interest in the succeeding year.

Accepted Answer

A) True 
 B)False

Question 8

Compound interest, rather than simple interest, must be used to properly evaluate long- term investment proposals.

Accepted Answer

A) True 
 B)False  True

Question 9

If $3,000 is put in a savings account today, what amount will be available three years from today?

Accepted Answer

A)  $3,000 ÷ 1.260
B)  $3,000 × 1.260
C)  $3,000 × 1.080 × 3
D)  ($3,000 × 1.080)  + ($3,000 × 1.166)  + ($3,000 × 1.260) E) B) and D)
F) None of the above

Question 10

Present value is

Accepted Answer

A)  the value now of a future amount.
B)  the amount that must be invested now to produce a known future value.
C)  always smaller than the future value.
D)  all of these.E) C) and D)
F) B) and C) D

Question 11

In determining present value, a company moves backward in time using a process of accumulation.

Accepted Answer

A) True 
 B)False

Question 12

On January 1, 2007, Nott Co.sold to Day Corp.$400,000 of its 10% bonds for $354,118 to yield 12%.Interest is payable semiannually on January 1 and July 1.What amount should Nott report as interest expense for the six months ended June 30, 2007?

Accepted Answer

A)  $17,706
B)  $20,000
C)  $21,247
D)  $24,000E) All of the above
F) B) and D) C

Question 13

The market price of a $200,000, ten-year, 12% (pays interest semiannually)  bond issue sold to yield an effective rate of 10% is

Accepted Answer

A)  $224,578.
B)  $224,925.
C)  $226,654.
D)  $374,472.E) All of the above
F) B) and C)

Question 14

Which table would you use to determine how much you would need to have deposited three years ago at 10% compounded annually in order to have $1,000 today?

Accepted Answer

A)  Future value of 1 or present value of 1
B)  Future value of an annuity due of 1
C)  Future value of an ordinary annuity of 1
D)  Present value of an ordinary annuity of 1E) C) and D)
F) B) and C)

Question 15

Schmitt Corporation will invest $10,000 every December 31st for the next six years (2006 - 2011) .If Schmitt will earn 12% on the investment, what amount will be in the investment fund on December 31, 2011?

Accepted Answer

A)  $41,114.
B)  $46,048.
C)  $81,152.
D)  $90,890.E) B) and C)
F) A) and D)

Question 16

In the time diagram below, which concept is being depicted?

Accepted Answer

A)  Present value of an ordinary annuity
B)  Present value of an annuity due
C)  Future value of an ordinary annuity
D)  Future value of an annuity dueE) A) and B)
F) All of the above

Question 17

On December 1, 2007, 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, 2007, the date of the sale.What present value concept is appropriate for this situation?

Accepted Answer

A)  Future amount of an annuity of 1 for four periods
B)  Future amount of 1 for four periods
C)  Present value of an ordinary annuity of 1 for four periods
D)  Present value of an annuity due of 1 for four periods.E) All of the above
F) B) and C)

Question 18

If the number of periods is known, the interest rate is determined by

Accepted Answer

A)  dividing the future value by the present value and looking for the quotient in the future value of 1 table.
B)  dividing the future value by the present value and looking for the quotient in the present value of 1 table.
C)  dividing the present value by the future value and looking for the quotient in the future value of 1 table.
D)  multiplying the present value by the future value and looking for the product in the present value of 1 table.E) B) and C)
F) A) and D)

Question 19

Catt Co.has a machine that cost $200,000.It is to be leased for 20 years with rent received at the beginning of each year.Catt wants a return of 10%.Calculate the amount of the annual rent.   Present Value of  Period  Ordinary Annuity 198.36492208.51356218.64869\begin{array}{l}\begin{array} { c c } &	ext { Present Value of }\	ext { Period } & 	ext { Ordinary Annuity } \19 & 8.36492 \20 & 8.51356 \21 & 8.64869\end{array}\end{array} Period 192021​ Present Value of  Ordinary Annuity 8.364928.513568.64869​​

Accepted Answer

A)  $21,356
B)  $23,909
C)  $29,728
D)  $23,492 E) None of the above
F) A) and B)

Question 20

Linton Corporation will invest $10,000 every January 1st for the next six years (2006 - 2011) .If Linton will earn 12% on the investment, what amount will be in the investment fund on December 31, 2011?

Accepted Answer

A)  $41,114
B)  $46,048.
C)  $81,152.
D)  $90,890.E) A) and C)
F) C) and D)

Exam 6: Accounting and the Time Value of Money

How much must be deposited on January 1, 2007 in a savings account paying 6% annually in order to make annual withdrawals of $20,000 at the end of the years 2007 and 2008? The present value of one at 6% for one period is .9434.

Correct Answer
verified

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?

Correct Answer
verified

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?

Correct Answer
verified

Ann Ruth wants to invest a certain sum of money at the end of each year for five years.The investment will earn 6% compounded annually.At the end of five years, she will need a total of $40,000 accumulated.How should she compute her required annual invest-ment?

Correct Answer
verified

For which of the following transactions would the use of the present value of an ordinary annuity concept be appropriate in calculating the present value of the asset obtained or the liability owed at the date of incurrence?

Correct Answer
verified

What amount should be deposited in a bank today to grow to $3,000 three years from today?

Correct Answer
verified

Compound interest uses the accumulated balance at each year end to compute interest in the succeeding year.

Correct Answer
verified

Compound interest, rather than simple interest, must be used to properly evaluate long- term investment proposals.

Correct Answer
verified
True

If $3,000 is put in a savings account today, what amount will be available three years from today?

Correct Answer
verified

Present value is

Correct Answer
verified
D

In determining present value, a company moves backward in time using a process of accumulation.

Correct Answer
verified

On January 1, 2007, Nott Co.sold to Day Corp.$400,000 of its 10% bonds for $354,118 to yield 12%.Interest is payable semiannually on January 1 and July 1.What amount should Nott report as interest expense for the six months ended June 30, 2007?

Correct Answer
verified
C

The market price of a $200,000, ten-year, 12% (pays interest semiannually) bond issue sold to yield an effective rate of 10% is

Correct Answer
verified

Which table would you use to determine how much you would need to have deposited three years ago at 10% compounded annually in order to have $1,000 today?

Correct Answer
verified

Schmitt Corporation will invest $10,000 every December 31st for the next six years (2006 - 2011) .If Schmitt will earn 12% on the investment, what amount will be in the investment fund on December 31, 2011?

Correct Answer
verified

In the time diagram below, which concept is being depicted?

Correct Answer
verified

Correct Answer
verified

If the number of periods is known, the interest rate is determined by

Correct Answer
verified

Correct Answer
verified

Linton Corporation will invest $10,000 every January 1st for the next six years (2006 - 2011) .If Linton will earn 12% on the investment, what amount will be in the investment fund on December 31, 2011?

Correct Answer
verified

Exam 6: Accounting and the Time Value of Money

How much must be deposited on January 1, 2007 in a savings account paying 6% annually in order to make annual withdrawals of $20,000 at the end of the years 2007 and 2008? The present value of one at 6% for one period is .9434.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Ann Ruth wants to invest a certain sum of money at the end of each year for five years.The investment will earn 6% compounded annually.At the end of five years, she will need a total of $40,000 accumulated.How should she compute her required annual invest-ment?

Correct AnswerverifiedShow Answer

For which of the following transactions would the use of the present value of an ordinary annuity concept be appropriate in calculating the present value of the asset obtained or the liability owed at the date of incurrence?

Correct AnswerverifiedShow Answer

What amount should be deposited in a bank today to grow to $3,000 three years from today?

Correct AnswerverifiedShow Answer

Compound interest uses the accumulated balance at each year end to compute interest in the succeeding year.

Correct AnswerverifiedShow Answer

Compound interest, rather than simple interest, must be used to properly evaluate long- term investment proposals.

Correct AnswerverifiedTrue

If $3,000 is put in a savings account today, what amount will be available three years from today?

Correct AnswerverifiedShow Answer

Present value is

Correct AnswerverifiedD

In determining present value, a company moves backward in time using a process of accumulation.

Correct AnswerverifiedShow Answer

On January 1, 2007, Nott Co.sold to Day Corp.$400,000 of its 10% bonds for $354,118 to yield 12%.Interest is payable semiannually on January 1 and July 1.What amount should Nott report as interest expense for the six months ended June 30, 2007?

Correct AnswerverifiedC

The market price of a $200,000, ten-year, 12% (pays interest semiannually) bond issue sold to yield an effective rate of 10% is

Correct AnswerverifiedShow Answer

Which table would you use to determine how much you would need to have deposited three years ago at 10% compounded annually in order to have $1,000 today?

Correct AnswerverifiedShow Answer

Schmitt Corporation will invest $10,000 every December 31st for the next six years (2006 - 2011) .If Schmitt will earn 12% on the investment, what amount will be in the investment fund on December 31, 2011?

Correct AnswerverifiedShow Answer

In the time diagram below, which concept is being depicted?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the number of periods is known, the interest rate is determined by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Linton Corporation will invest $10,000 every January 1st for the next six years (2006 - 2011) .If Linton will earn 12% on the investment, what amount will be in the investment fund on December 31, 2011?

Correct AnswerverifiedShow Answer

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True

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D

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C

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