52.
An investor purchases a 20-year, $1,000 par value bond that pays semiannual interest of $40.
If the semiannual market rate of interest is 5%, what is the current market value of the bond?
A. $828.
B. $1,686.
C. $1,000.
D. $893.
*PVA of $1: n = 40; i
75.
Listed below are 5 terms followed by a list of phrases that describe or characterize each of the
terms. Match each phrase with the correct term.
1. Future value
Accumulation of an amount with interest. 1
Accumulation of a series of equal
2. Future v
74.
Fenland Co. plans to retire $100 million in bonds in five years, so it wishes to create a fund by
making equal investments at the beginning of each year during that period in an account it
expects to earn 8% annually. What amount does Fenland need to
73.
You borrow $20,000 to buy a boat. The loan is to be paid off in monthly installments over one
year at 18% interest annually. The first payment is due one month from today. What is the
amount of each monthly payment?
A. $1,667.
B. $1,511.
C. $1,834.
D
72.
Chancellor Ltd. sells an asset with a $1 million fair value to Sophie Inc. Sophie agrees to make
six equal payments, one year apart, commencing on the date of sale. The payments include
principal and 6% annual interest. Compute the annual payments.
A
Learning Objective: 06-08 Solve for unknown values in annuity situations involving present value.
Topic: Using the PV of an annuity, solve for unknown values
71.
Kunkle Company wishes to earn 20% annually on its investments. If it makes an investment
that
69.
First Financial Auto Loan Department wishes to know the payment required at the first of each
month on a $10,500, 48-month, 11% auto loan. To determine this amount, First Financial
would:
A. Multiply $10,500 by the present value of 1.
B. Divide $10,5
65.
Loan C has the same principal amount, payment amount, and maturity date as Loan D.
However, Loan C is structured as an annuity due, while Loan D is structured as an ordinary
annuity. Loan C's interest rate is:
A. Higher than Loan D.
B. Less than Loan
67.
George Jones is planning on a cruise for his 70th birthday party. He wants to know how much
he should set aside at the beginning of each month at 6% interest to accumulate the sum of
$4,800 in five years. He should use a table for the:
A. Future valu
64.
On January 1, 2013, Glanville Company sold goods to Otter Corporation. Otter signed a
noninterest-bearing note requiring payment of $15,000 annually for six years. The first payment
was made on January 1, 2013. The prevailing rate of interest for thi
77.
Listed below are 5 terms followed by a list of phrases that describe or characterize each of the
terms. Match each phrase with the correct term.
Current worth of a series of equal
1. Effective yield
payments received at the end of a period. 4
The r
76.
Listed below are 5 terms followed by a list of phrases that describe or characterize each of the
terms. Match each phrase with the correct term.
1. Monetary asset
Claim to a fixed amount of cash. 1
Current worth of a series of equal
payments receiv
78.
Listed below are 5 terms followed by a list of phrases that describe or characterize each of the
terms. Match each phrase with the correct term.
The money to which an amount invested
1. Interest
2. Future value of a
single amount
3. Ordinary annuit
60.
Which of the following must be known to compute the interest rate paid from financing an asset
purchase with an annuity?
A. Fair value of the asset purchased, number and dollar amount of the annuity payments.
B. Present value of the annuity, dollar a
87.
Touche Manufacturing is considering a rearrangement of its manufacturing operations. A
consultant estimates that the rearrangement should result in after-tax cash savings of $6,000
the first year, $10,000 for the next two years, and $12,000 for the n
83.
Suppose that Healdsburg enters into a sales contract with an auto manufacturer on January 1,
2013, to provide tires that cost Healdsburg $18 million to produce. The buyer offers Healdsburg
$6 million in cash and agrees to take over the principal paym
86.
DON Corp. is contemplating the purchase of a machine that will produce net after-tax cash
savings of $20,000 per year for five years. At the end of five years, the machine can be sold to
realize after-tax cash flows of $5,000. Interest is 12%. Assume
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 06-02 Compute the future value of a single amount.
Topic: Compute the FV of a single amount
85.
Compute the present value of the following single amounts to be received at the end of the
specified per
81.
Suppose that Healdsburg wants to buy back the 7.75% notes on December 31, 2013, (i.e., five
years early) when the going interest rate is 6%, thereby retiring the $345,154,000 in debt. How
much would Healdsburg have to pay for the notes (principal onl
Short Answer Questions
The following information was disclosed in the Debt footnote to the financial statements of
Healdsburg Company for the year ended December 31, 2012:
Debt. The following table summarizes the long-term debt of the Company at December
79.
Listed below are 10 terms followed by a list of phrases that describe or characterize the terms.
Match each phrase with the correct term.
The first cash flow occurs more than
1. Future value of an
annuity due
one period after the date of the
agreeme
63.
Garland Inc. offers a new employee a lump-sum signing bonus at the date of employment,
June 1, 2013. Alternatively, the employee can take $39,000 at the date of employment plus
$10,000 each June 1 for five years, beginning in 2017. Assuming the emplo
Difficulty: 3 Hard
Learning Objective: 06-07 Compute the present value of an ordinary annuity; an annuity due; and a deferred annuity.
Topic: Compute the PV of an ordinary annuity, an annuity due, and a deferred annuity
62.
Quaker State Inc. offers a new
39.
Reba wishes to know how much would be in her savings account if she deposits a given sum
in an account and leaves it there at 6% interest for five years. She should use a table for the:
A. Future value of an ordinary annuity of 1.
B. Future value of
43.
Claudine Corporation will deposit $5,000 into a money market sinking fund at the end of each
year for the next five years. How much will accumulate by the end of the fifth and final payment
if the sinking fund earns 9% interest?
A. $32,617.
B. $29,92
40.
Ajax Company purchased a five-year certificate of deposit for its building fund in the amount of
$220,000. How much should the certificate of deposit be worth at the end of five years if
interest is compounded at an annual rate of 9%?
A. $855,723.
B.
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 06-03 Compute the present value of a single amount.
Topic: Compute the PV of a single amount
42.
How much must be deposited at the beginning of each year to accumulate to $10,000 in four
years if intere
37.
Column 5 is an interest table for the:
A. Present value of 1.
B. Future value of 1.
C. Present value of an ordinary annuity of 1.
D. Present value of an annuity due of 1.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
Blooms: Understand
Diffi
35.
Column 3 is an interest table for the:
A. Present value of 1.
B. Future value of 1.
C. Present value of an ordinary annuity of 1.
D. Present value of an annuity due of 1.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
Blooms: Understand
Diffi
Chapter 18 Reporting Inventory
Introduction
Inventory describes assets that are ready for sale, being produced for sale, or ready for use in
production process
Retail companies often refer to their inventory as merchandise inventory
o Inventories includ