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Quiz 3 ACCT
Terms in this set (14)
The Strug Company purchased office furniture and equipment for $8,600 and agreed to pay for the purchase by making five annual installment payments beginning immediately. The installment payments include interest at 8%. What is the required annual installment payment
A series of equal periodic payments in which the first payment is made on the date of the contract is:
An annuity due.
Sandra wants to calculate how much money she needs to deposit today into a savings account which earns 5% in order to be able to withdraw $3,000 at the end of each of the next 6 years. She should use which present value concept?
Present value of an ordinary annuity of $1 for 6 periods.
A company issued a 20-year, $1,000 par value bond that pays semiannual interest of $40. If the semiannual market rate of interest is 5%, at what amount did the bond sell?
Given a set of present value tables, an annual interest rate, the dollar amount of equal payments made, and the number of semiannual payments, what other information is necessary to calculate the present value of the series of payments?
The timing of the payments (whether they are at the beginning or end of the period).
On March 31, 2021, the Freeman Company leased a machine. The lease agreement requires Freeman to pay 10 annual payments of $6,000 on each March 31, with the first payment due on March 31, 2021. Assuming an interest rate of 10% and that this lease is treated as an installment sale, Freeman will initially value the machine by multiplying $6,000 by which of the following factors?
Present value of an annuity due of $1 at 10% for 10 periods.
The Bello Corporation wishes to accumulate $2,000,000 for plant expansion. The funds are required on January 1, 2026. Bello intends to make five equal annual deposits in a fund that will earn interest at 7% compounded annually. The first deposit is made on January 1, 2021. Present value and future value facts are as follows:
The Strug Company purchased office furniture and equipment for $8,600 and agreed to pay for the purchase by making five annual installment payments beginning one year from today. The installment payments include interest at 8%. What is the required annual installment payment
Harry Morgan plans to make 30 quarterly deposits of $200 into a savings account at the end of each quarter. The savings account pays interest at an annual rate of 8%, compounded quarterly. What is the value of the savings account after the 30 quarterly deposits?
Wellman Company is considering investing in a two-year project. Wellman's required rate of return is 10%. The present value of $1 for one period at 10% is 0.909 and for two periods at 10% is 0.826. The project is expected to create cash flows, net of taxes, of $80,000 in the first year, and $100,000 in the second year. Wellman should invest in the project if the project's cost is less than or equal to:
The Richards Company purchased a machine for $5,000 down and $300 a month payable at the end of each of the next 36 months. How would the cash price of the machine be calculated, assuming the annual interest rate is given?
$5,000 plus the present value of an ordinary annuity of $300 for 36 periods.
Hailey wants to cash in her winning lottery ticket. She can either receive eight $200,000 semiannual payments starting today, based on a 6% annual interest rate, or she can receive a single-amount payment today. What is the single-amount payment she can receive today that would be equivalent to the eight-payment option except that she would not have to wait for years to collect her prize money
Danielle wants to know how much she should invest now at 5% interest in order to accumulate a sum of $45,000 in four years. She should use a table for the:
present value of 1
A series of equal periodic payments in which the first payment is made one compounding period after the date of the contract is:
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