acct appendix c
The formula to determine the future value of $1,000 in 2 years compounded annually at a rate of 10% is
$1,000 + ($1,000 x 10%) + ($1,100 x 10%)
The future value of $1,000 invested today at a rate of 10% compounded annually will equal ____ in 2 years. (Round to the nearest cent and use the tables in your text.)
$1,210
The present value of $2,000 at 7% compounded annually over 5 years rounded to the nearest $1 equals
$1,426=$2,000 x 0.7130 (per the present value table in the text)
the present value of $2,000 at 7% compounded annually over 5 years rounded to the nearest $1 equals ______.
$1,426=$2,000 x 0.7130 (per the present value table in the text)
On January 1, Vango, Inc. purchased a $30,000 van and promised to pay $11,223.34 on December 31 for the next 3 years. The market rate of interest is 6% compounded annually. The entry to record the 1st payment on December 31 includes ______. (Check all that apply.)
$1,800 debit to Interest Expense $11,223.34 credit to Cash $9,423.34 debit to Notes Payable
Which of the following have the same present value given a 10% interest rate compounded annually?
$1.10 one year from today $1 today
On January 1, Year 1, Burrows, Inc. received $8,900 and agreed to pay $10,000 on January 1, Year 3. The market rate of interest is 6% compounded annually. Assuming Notes Payable includes the accrued interest through year-end December 31, Year 2, the journal entry to record the payment of this note on January 1, Year 3 includes a ______. (Check all that apply.) Multiple select question. $
$10,000 credit to Cash $10,000 debit to Notes Payable
How much interest will be earned in 2 years if $1,000 is invested today at 5% compounded annually?
$102.50 = ($1,000 x 5%) + ($1,050 x 5%)
What is the cost of a car if you make equal annual payments of $6,000 over 4 years compounded annually at 9%, rounded to the nearest $1? Multiple choice question.
$19,438=$6,000 x 3.2397
The present value of $1 received annually over 3 years compounded at 9% annually rounded to the nearest cent equals ______. Multiple choice question.
$2.53=$1 x 2.5313
On January 1, Vango, Inc. purchased a van and promised to pay $11,223.34 on December 31 for the next 3 years. The market rate of interest is 6% compounded annually. The entry to record the purchase includes a ______. (Check all that apply.) Note: Present value of an annuity at 6% and 3 years = 2.6730; Present value of $1 at 6% and 3 years = 0.8396
$30,000 credit to Notes Payable $30,000 debit to Equipment
Discounters, Inc. issued $50,000, 4-year, 6% bonds that pay interest annually on January 1 when the going market interest rate was 7%. On the issue date, the carrying value of bonds, net of discount or including premium, rounded to the nearest $1, i
$48,307 = ($50,000 x 0.7629) + (($50,000 x 0.06) x 3.3872)
What would be the formula to calculate the future value of $5,000 in 3 years compounded annually at a rate of 2%?
$5,000 + ($5,000 x 2%) + ($5,100 x 2%) + ($5,202 x 2%)
Primo, Inc. issued $50,000, 5-year, 6% bonds that pay interest annually on January 1 when the going market interest rate was 6%. The issue (sale) price of the bonds equals the present value of ______ discounted at 6% and 5 periods.
$50,000 plus the present value of an annuity of $3,000, both
On January 1, 2018, Burrows, Inc. received $8,900 and agreed to pay $10,000 on January 1, 2020. The market rate of interest is 6% compounded annually. For the year ended December 31, 2018, Interest Expense on this note payable equals ______.
$534
The present value of a 12% annuity requiring quarterly payments of $1,000 over 2 years, rounded to the nearest $1, equals Blank______.
$7,020=$1,000 x 7.0197; payments are quarterly thus, the number of periods is 8 and the interest 3%.
The present value of a 12% annuity requiring quarterly payments of $1,000 over 2 years, rounded to the nearest $1, equals
$7,020=$1,000 x 7.0197; payments are quarterly thus, the number of periods is 8 and the interest 3%. $7,040
he entry to record the purchase of equipment that requires a $10,000 payment in 2 years includes a ______. The market rate of interest is 9% compounded annually.
$8,417 debit to Equipment $8,417 credit to Notes Payable
Bondable, Inc. issued $100,000, 10-year, 9% bonds that pay interest annually on January 1 when the going market interest rate was 10%. The issue (sale) price of the bonds equals
$93,851.40 = ($100,000 x 0.3855) + (($100,000 x 0.09) x 6.1446)
On January 1, 2018, Burrows, Inc. received $16,834 and agreed to pay off the note and interest owed on January 1, 2020. The market rate of interest is 9% compounded annually. The payment made on January 1, 2020 equals a ______ credit to Cash. (round to the nearest $1)
The future value of $16,834 at 9% in two years equals $20,000 (=$16,834 x 1.1881 (FV at 9% and 2 periods)). $17,591
Which of the following will result in the greatest value?
The future value of a $1 annuity at 10% over 4 years
Which of the following will result in the greatest value given the factors 2 years and 3%?
The future value of a $1,000 annuity
The number of periods (n) and interest rate (i) per period used in calculating the present value of an annuity that is paid monthly over 5 years at 12% annually are ______.
The number of periods is the total number of interest payments which is 60 (=12 payments per year times 5 years). n=60; i=1%
he present value of receiving $1,000 in 3 years in the future will be
The present value is determined by discounting (subtracting) interest and thus is less than the $1,000 future value.
If the following was entered into a financial calculator app, what would be the result?Present Value = (leave blank)Payment = 0Future Value = -3000Annual Rate (%) = 4Periods = 3Compounding = Annually
The present value of $3,000 to be received in 3 years discounted at 4%
If the following was entered into a financial calculator app, what would be the result?Payment = -3000Future Value = 0Annual Rate (%) = 4Periods = 3Compounding = Annually
The present value of a $3,000 annuity given interest is compounded annually for 3 years at 4%
On January 1, Vango, Inc. purchased a $30,000 van and promised to pay $11,223.34 on December 31 for the next 3 years. The market rate of interest is 6% compounded annually. The entry to record the 2nd payment on December 31, will include a ______ than in the 1st payment
larger debit to Notes Payable smaller debit to Interest Expense
f the market rate of interest is greater than the stated rate on a bond, then the price of the bond will be ______ than the face value of the bond because the face value and interest payments are discounted using the ______ rate of interest.
less; market
Assuming no inflation, $1 invested today is worth
more than $1 received in the future because interest can be earned over time
On January 1, Vango, Inc. purchased a van and promised to pay $11,223.34 on December 31 for the next 3 years. The market rate of interest is 6% compounded annually. The amount of the purchase is calculated by ______
multiplying $11,223.34 by the present value of an annuity with n=3 and i=6%.
On January 1, Vango, Inc. purchased a van and promised to pay $11,223.34 on December 31 for the next 3 years. The market rate of interest is 6% compounded annually. The amount of the purchase is calculated by ______. Multiple choice question.
multiplying $11,223.34 by the present value of an annuity with n=3 and i=6%.
When calculating the present value of $1,000, the result tells you the amount
needed to invest today to receive $1,000 in the future
The present value of an annuity is the value ______.
now of a series of equal amounts to be received or paid in the future
The present value of $1,000 in 3 years represents the amount you pay ______.
now to have $1,000 in year 3
To solve a future value problem, you need to know the amount to be invested, the interest rate and the number of _____ over which the amount will earn interest
periods
In Excel, the formula "= PV(0.04, 3, 0, −1000)" will calculate the
present value of $1,000 discounted at 4% to be received in 3 years
In Excel, the formula "= PV(0.04, 3, 0, −1000)" will calculate the Blank______.
present value of $1,000 discounted at 4% to be received in 3 years
Primo, Inc. issued $50,000, 5-year, 7% bonds that pay interest annually on January 1 when the going market interest rate was 6%. The issue (sale) price of the bonds equals the ______.
present value of $50,000 plus the present value of an annuity of $3,500, both discounted at 6% and 5 periods.
In Excel, the formula "=PV(0.04,3,-1000,0)" will calculate the _
present value of a $1,000 annuity payment over 3 years at a rate of 4%
The issue (sale) price of a bond equals the ______.
sum of the present value of the principal and interest payments
The journal entry to record the purchase of an asset in exchange for $100,000 due in 3 years at a market rate of interest of 12% compounded annually includes a debit to the asset in the amount of ______.
the present value of $100,000 discounted at 12% for 3 years
The journal entry to record the purchase of an asset in exchange for $100,000 due in 3 years at a market rate of interest of 12% compounded annually includes a debit to the asset in the amount of ______. Multiple choice question.
the present value of $100,000 discounted at 12% for 3 years
When purchasing equipment by signing a note to pay $200,000 in 2 years at 6%, the debit to Equipment will equal ______ at 6% over 2 years.
the present value of $200,000 discounted
If the market rate of interest equals the stated rate on a bond, then the price of the bond will be ______ the face value of the bond because the face value and interest payments are discounted using the ______ rate of interest. Multiple choice question.
the same as; market
For which of the following would you compute the present value of $1,000?
to determine how much you would have to invest now to earn $1,000 in the future.
The time value of money is the idea that $1 received
today is worth more than $1 to be received in the future
Mortars, Inc. issued $100,000, 10-year, 9% bonds that pay interest annually on January 1 when the going market interest rate was 8%. The issue (sale) price of the bonds, rounded to the nearest $1, equals
106,710.90 = ($100,000 x 0.4632) + (($100,000 x 0.09) x 6.7101). Note that this bond sold at a premium because the 9% stated rate on the bond is greater than the 8% market rate of interest.
The present value of a 12% annuity requiring quarterly payments of $1,000 over 2 years, rounded to the nearest $1, equals Blank______. Multiple choice question.
7,020=$1,000 x 7.0197; payments are quarterly thus, the number of periods is 8 and the interest 3%.
Using Excel, the correct formula to determine the future value of an annuity of $2,000 invested at the end of each year, compounded annually at 5% for four years equals
=FV(0.05,4,-2000,0)
Which of the following factors will cause the future value of $1 to be higher
A higher interest rate A compounding of interest more frequen
On January 1, 2018, Burrows, Inc. received $8,900 and agreed to pay $10,000 on January 1, 2020. The market rate of interest is 6% compounded annually. For the 2nd year of this note (i.e., ended December 31, 2019), Interest Expense on this note payable equals
For the year ended December 31, 2019, the company's Interest Expense equals $566 (=$9,434 x 6%).
To determine the present value of $2,000 discounted at a rate of 6% annually over 5 years using the financial calculator app shown in the textbook requires entering the following information, enter the correct amount:Present Value = (leave blank)Payment =
Blank 1: 0 Blank 2: -2000, (2000), -2,000, or (2,000) Blank 3: 6 Blank 4: 5
On January 1, 2018, Burrows, Inc. received $8,900 and agreed to pay $10,000 on January 1, 2020. The market rate of interest is 6% compounded annually. For the year ended December 31, 2018, Interest Expense on this note payable equals ______.
In 2018, Interest Expense is $534 = $8,900 x 6%. In 2019, Interest Expense is $566 rounded = (($8,900 + 534) x 6%). By January 1, 2020, the Note Payable balance will grow to equal $10,000. $600
f the following was entered into a financial calculator app, what would be the result?Present Value = 0Payment = -3000Annual Rate (%) = 4Periods = 3Compounding = Annually
The future value a $3,000 annuity compounded annually for 3 years at 4%
Which of the following statements are true?
Compounding interest at 10% over a 20-year period results in earning more in interest than the original amount invested. Compounding interest monthly will result in a higher return than compounding annually. Compounding interest means earning interest on interest.
To determine the price of a bond, the interest payments are discounted using the Unavailable value of a(n) and added to the face value discounted using the value of a(n) amount. (Enter one word per blank.)
Correct Answer Blank 1: present Blank 2: annuity Blank 3: present Blank 4: single
Using Excel, the correct formula to determine the future value of an annuity of $2,000 invested at the end of each year, compounded annually at 5% for four years equals
FV(0.05,4,-2000,0)
The formula to enter in Excel to determine the future value is
FV(i,n, FV pmt, PV)
On January 1, 2018, Burrows, Inc. received $8,900 and agreed to pay $10,000 on January 1, 2020. The market rate of interest is 6% compounded annually. For the 2nd year of this note (i.e., ended December 31, 2019), Interest Expense on this note payable equals ___
Expense equals $566 (=$9,434 x 6%).
Which of the following will result in the highest future value?
Making a $1,000 annuity for 10 years starting today at 4% and then stopping leaving the amount to grow for 10 more years
Using Excel, the correct formula to determine the present value of an annuity of $2,000 invested at the end of each year, compounded annually at 5% for four years equals
PV(0.05,4,-2000)
The future value of depositing $1,000 at the end of each year for 4 years with a rate of 9% equals
The $1,000 deposit each year for 4 years at 9% amounts to $4,573 (=$1,000 x 4.5731).
On January 1, Vango, Inc. purchased a $30,000 van and promised to pay $11,223.34 on December 31 for the next 3 years. The market rate of interest is 6% compounded annually. The entry to record the 1st payment on December 31 includes
The credit to Cash of $11,223.34 minus the debit to Interest Expense of $1,800 (or $30,000 x 6%) equals the credit to Notes Payable of $9,423.34.
The future value of $1 invested today at a rate of 9% compounded annually will equal ____ in 4 years. (Round to the nearest cent and use the tables in your text.) Multiple choice question.
The factor to use is the amount from the Future Value of $1 using 4 and 9% which gives you an answer of $1.41 (=$1 x 1.4116).
If the following was entered into a financial calculator app, what would be the result?Present Value = 0Payment = -3000Annual Rate (%) = 4Periods = 3Compounding = Annually
The future value a $3,000 annuity compounded annually for 3 years at 4%
The 5-year present value of $1 at 10% equals 0.6209 and at 9% equals 0.6499. The 5-year present value of an annuity at 10% equals 3.7908 and at 9% equals 3.8897. A $1,000, 10%, 5-year bond that pays interest annually would sell for how much if the going market rate of interest were 9%?
The present value of the $1,000 principal at the 9% market rate equals $649.90 (=$1,000 x 0.6499). The present value of the annual interest payments of $100 (=$1,000 x 10% stated rate) at the market rate of 9% for 5 years equals $388.97 (=$100 x 3.8897). The present values of these payments equals the price of the bond or $1,038.87 (=$649.90 + $388.97).
A monthly car payment is a form of
an annuity
A(n) is a series of consecutive equal payments such as mortgage payments.
annuity
A company purchased equipment by signing a 6% note with the principal and interest due 2 years, the credit to Notes Payable will ______ the purchase price of the equipment.
be more than
o determine the price of a bond, the interest paymen
discounted using the present value of an annuity is added to the face value discounted using the present value of a single amount
o determine the price of a bond, the interest payment
discounted using the present value of an annuity is added to the face value discounted using the present value of a single amount
The present value of a single amount to be received in 3 years is determined by ______ the interest earned over the 3 years.
discounting the future amount by subtracting
In Excel, the formula "=FV(0.04,3,-1000,0)" will calculate the ______
future value of a $1,000 payment made annually over 3 periods at a rate of 4%
n Excel, the formula "=FV(i,n, FV pmt, PV)" will calculate the
future value of a single amount
The value of $1 received in the present is ______ than one dollar received in the future because of ______.
greater; the time value of money greater; interest
The future value of depositing $1,000 at the end of each year for 4 years with a rate of 9% equals ______
he $1,000 deposit each year for 4 years at 9% amounts to $4,573 (=$1,000 x 4.5731).
When using Excel to compute the present value of $500 monthly payments over 3 years at 12%, the rate (i), the number of periods (n), and payment amount (PV pmt) to input are Blank_
i = 0.01; n = 36; PV pmt = −500
When using Excel to compute the present value of $10,000 annual payments over 10 years at 6%, the rate (i), the number of periods (n), and the present value amount (PV pmt) to input are as follows Blank______.
i = 0.06; n = 10; PV pmt = −10,000
Compound interest is the ability to earn______ on interest. (Enter one word per blank.)
interest
To solve a future value problem, you need to know the amount to be invested, the ______ and the period of time. Multiple choice question.
interest rate