Question 1

What are the five steps that can be applied to all of the time value of money techniques to assist in calculations?

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Question 2

What is the difference between simple interest and compound interest?

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Question 3

Samos Excavating is considering purchasing some new equipment for the company. Due to the expense involved, the equipment company is giving Samos the option of choosing between four different payments plans.

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Question 4

What four conditions must exist in solving measurement problems involving the use of annuities?

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Question 5

What is the formula to compute the present value of a single sum?

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Question 6

The FASB concepts statement relating to cash flow information introduces the concept of expected cash flows when using present values for accounting measurements. Assume that Smith Company determined that it has a 40% probability of receiving $10,000 one year from now and a 60% probability of receiving $10,000 two years from now.
Required:
Using the FASB concepts, calculate the present value of the expected cash flows assuming a 12% interest rate compounded annually.

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Question 7

What estimations are involved in present value measurements?

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Question 8

What is the formula to compute the future value of a single sum?

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Question 9

Mathias Company estimated that it has a 20% probability of receiving $240,000 one year from now, a 30% probability of receiving $240,000 two years from now, and a 50% probability of receiving $240,000 three years from now.
Required:
Using the FASB's concept of "expected cash flows," calculate the present value of the expected cash flows assuming a 10% interest rate compounded annually.

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Question 10

In what situations would a company use present or future value?

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Question 11

Aunt Darla has agreed to deposit a lump sum into an account that pays 12% interest compounded annually in order to pay for her niece's college education. The niece estimated that she will need to withdraw $40,000 at the beginning of each year for four years to pay for room, board, tuition, and books. Aunt Darla will deposit the lump sum on August 1, 2014, and the niece will make the first withdrawal on August 1, 2020.
Required:
Determine the amount that Aunt Darla must deposit. Clearly label all work.

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Question 12

Beginning December 31, 2018, eight equal annual withdrawals will be made.
Required:
Using the appropriate tables, determine the equal annual withdrawals if $30,000 is invested at an interest rate of 14% compounded annually on:
1) January 1, 2018
2) December 31, 2018
3) January 1, 2013

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Question 13

Complete the following equation:
Time Value of Money = ______(1)_________+_____(2)________+_______(3)_______

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Time Value of Money...

Question 14

Although most accountants believe that the use of present value creates relevant accounting measurements, there are some reliability questions. Discuss the reasons why present value computations create less reliable measurements.

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Question 15

A beginning accounting student comes to you with the following question, "What is the time value of money and does it relate to interest?"
Required:
Explain the two concepts and how they are related.

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Question 16

The FASB Statement of Financial Accounting Concepts No. 7 describes five elements that together may be used to determine the value of various assets and liabilities, what are these five elements?

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Question 17

The present values of ordinary annuities, annuities due, and deferred annuities were discussed in the textbook. Discuss the ways these three annuities are similar and dissimilar.

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Question 18

An accounting student has just been introduced to present value analysis and comes to you with the following question, "How is present value used in the financial statements?"
Required:
Give the student examples of financial statement accounts that are stated at present value and explain the advantages of using present value for certain financial statement items.

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Question 19

A beginning accounting student has just been introduced to present and future values analysis and has been told that it is based on compound interest, not simple interest. The student is confused about the differences between the two interest methods.
Required:
Explain the difference between the two methods using a single deposit of $1,000 for two years at 10% interest.

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Question 20

What is the formula for the present value of an annuity due of any cash flow amount?

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Quiz 23: Time Value of Money Module

What are the five steps that can be applied to all of the time value of money techniques to assist in calculations?

What is the difference between simple interest and compound interest?

Samos Excavating is considering purchasing some new equipment for the company. Due to the expense involved, the equipment company is giving Samos the option of choosing between four different payments plans.

What four conditions must exist in solving measurement problems involving the use of annuities?

What is the formula to compute the present value of a single sum?

What estimations are involved in present value measurements?

What is the formula to compute the future value of a single sum?

In what situations would a company use present or future value?

Beginning December 31, 2018, eight equal annual withdrawals will be made. Required: Using the appropriate tables, determine the equal annual withdrawals if $30,000 is invested at an interest rate of 14% compounded annually on: 1) January 1, 2018 2) December 31, 2018 3) January 1, 2013

Complete the following equation: Time Value of Money = (1)_+_(2)__+_(3)_____

Although most accountants believe that the use of present value creates relevant accounting measurements, there are some reliability questions. Discuss the reasons why present value computations create less reliable measurements.

A beginning accounting student comes to you with the following question, "What is the time value of money and does it relate to interest?" Required: Explain the two concepts and how they are related.

The FASB Statement of Financial Accounting Concepts No. 7 describes five elements that together may be used to determine the value of various assets and liabilities, what are these five elements?

The present values of ordinary annuities, annuities due, and deferred annuities were discussed in the textbook. Discuss the ways these three annuities are similar and dissimilar.

What is the formula for the present value of an annuity due of any cash flow amount?

Quiz 23: Time Value of Money Module

What are the five steps that can be applied to all of the time value of money techniques to assist in calculations?

What is the difference between simple interest and compound interest?

Samos Excavating is considering purchasing some new equipment for the company. Due to the expense involved, the equipment company is giving Samos the option of choosing between four different payments plans.

What four conditions must exist in solving measurement problems involving the use of annuities?

What is the formula to compute the present value of a single sum?

What estimations are involved in present value measurements?

What is the formula to compute the future value of a single sum?

In what situations would a company use present or future value?

Beginning December 31, 2018, eight equal annual withdrawals will be made. Required: Using the appropriate tables, determine the equal annual withdrawals if $30,000 is invested at an interest rate of 14% compounded annually on: 1) January 1, 2018 2) December 31, 2018 3) January 1, 2013

Complete the following equation: Time Value of Money = ______(1)_________+_____(2)________+_______(3)_______

Although most accountants believe that the use of present value creates relevant accounting measurements, there are some reliability questions. Discuss the reasons why present value computations create less reliable measurements.

A beginning accounting student comes to you with the following question, "What is the time value of money and does it relate to interest?" Required: Explain the two concepts and how they are related.

The FASB Statement of Financial Accounting Concepts No. 7 describes five elements that together may be used to determine the value of various assets and liabilities, what are these five elements?

The present values of ordinary annuities, annuities due, and deferred annuities were discussed in the textbook. Discuss the ways these three annuities are similar and dissimilar.

What is the formula for the present value of an annuity due of any cash flow amount?

Complete the following equation: Time Value of Money = (1)_+_(2)__+_(3)_____