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cha6 Ex

# cha6 Ex - 6 Accounting and the Time Value of Money 21 Which...

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6. Accounting and the Time Value of Money 21. Which of the following transactions would require the use of the present value of an annuity due concept in order to calculate the present value of  the asset obtained or liability owed at the date of incurrence? a. A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement. b. A capital lease is entered into with the initial lease payment due one month subsequent to the signing of the lease agreement. c. A ten-year 8% bond is issued on January 2 with interest payable semiannually on July 1 and January 1 yielding 7%. d. A ten-year 8% bond is issued on January 2 with interest payable semiannually on July 1 and January 1 yielding 9%. 22. What best describes the time value of money? 23. Which of the following situations does NOT base an accounting measure on present values? 24. What is interest? 25. What is NOT a variable that is considered in interest computations? a. Principal. b. Interest rate. c. Assets. d. Time. 26. If you invest \$50,000 to earn 8% interest, which of the following compounding approaches would return the lowest amount after one year? 27. Which factor would be greater -- the present value of \$1 for 10 periods at 8% per period or the future value of \$1 for 10 periods at 8% per period? 28. Which of the following tables would show the smallest value for an interest rate of 5% for six periods?

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