WorksheetsIntermediate Accounting Chapter 5 Review
Total questions: 50
Worksheet time: 8hrs 20mins
The difference between $100 invested now and $105 at the end of year 1 represents the
Interest Rate
Time Value of Money
Future Value
Compound Interest Rate
Which of the following concepts is crucial for valuing assets and liabilities in financial reporting when considering the time value of money?
Net Present Value
Internal Rate of Return
Future Value
Present Value
Jim borrows $1,000 and has to repay $1,100 at the end of the year. The $100 payment is referred to as _____
Annuity
Interest
Payment
Present Value
Simple interest is computed by multiplying certain items. Which of the following is NOT one of those items?
Applicable Interest Rate
Period of Time
Accumulated Interest
Initial Investment
What does the difference between the present value and future value of an investment represent?
The Principal Amount
The Time Value of Money
The Interest Rate
The Loan Repayment
First County Bank loans $100,000 to a customer. At the end of the year, the customer is required to repay the $100,000 loan with 8% interest. What is the amount of interest First County Bank earns on this loan?
$80,000
$108,000
$8,000
$800
What is the primary condition for compound interest to occur?
A Low Interest Rate
A High Interest Rate
The Regular Deposits to the Investment
The Investment Remains Invested for Multiple Periods
Why is the concept of the time value of money important in accounting?
It ensures that all assets are valued at their historical cost.
It simplifies the calculation of financial ratios.
It allows for the recognition of revenue when earned, regardless of when cash is received.
It helps in valuing certain assets and liabilities for financial reporting purposes.
Which of the following refers to the amount of money paid or received above the original amount borrowed or lent?
Investments
Equity
Dividends
Interest
Which of the following is NOT a factor affecting simple interest?
The Duration of the Investment
The Amount of the Initial Investment
The Type of Investment Account
The Applicable Interest Rate
Sperry Corp. signs a 2-year note payable for $100,000. The principal of the note and interest are due in 2 years, and the note bears interest at 10% compounded annually. What is the amount of interest that must be repaid at the end of year 2?
$10,000
$20,000
$21,000
$10,250
On January 1, McLean Corp. borrowed $50,000 with 8% simple interest. What is the amount of interest that must be repaid at year-end?
$54,000
$400
$4,000
$2,000
On January 1, year 1, Dennis borrows $20,000 at 6% interest compounded semi-annually. What is the amount of interest Dennis will pay at the end of year 4? Round your answer to the nearest dollar.
$4,800
$5,250
$5,335
$2,510
Compound interest is calculated on:
Both the principal amount and the accumulated interest.
Only the accumulated interest.
Neither the principal amount nor the accumulated interest.
Only the principal amount.
Joshua would like to deposit $12,000 in a savings account today. The goal is to calculate what that investment will be worth when retirement occurs at age 62. What amount is being calculated?
Future Value
Market Value
Present Value
Which of the following concepts is crucial for valuing assets and liabilities in financial reporting when considering the time value of money?
Future Value
Net Present Value
Present Value
Internal Rate of Return
Given a 5 year investment with semiannual compounding at 10% interest, what is the i value?
1%
5%
10%
20%
Jennifer invested $20,000 in a savings account for 3 years at 6% compounded annually. What is the future value of Jennifer's investment?
$23,881
$23,820
$23,600
$21,200
Larry signs a note payable for $40,000. The principal of the note and interest are due in 2 years, and the note bears interest at 12% compounded annually. What is the total interest that must be repaid at the end of year 2?
$4,944
$9,600
$4,800
$10,176
Which of the following is the correct formula to calculate future value?
I(1+i)n
I(1-i)n
I(1+i)2
On January 1, year 1, Mary borrows $30,000 at 8% interest compounded semi-annually. What is the amount of interest Mary will pay at the end of year 3? Round your answer to the nearest dollar.
$2,400
$7,791
$7,960
$7,200
What is the future value of a $1000 investment after 4 years at 10% annual interest? (USE EXCEL OR TABLES)
$1,400.00
$1,611.00
$1,464.10
$1,331.00
The amount of money that a dollar will grow to at some point in the future is known as the
Future Value
Market Value
Present Value
The concept of future value is based on the principle of:
Annuity
Discontinuing
Simple Interest
Compound Interest
The i value in present and future value tables refers to what?
The annual interest rate.
The annual interest rate divided by total number of compounding periods.
The annual interest rate divided by number of compounding periods per year.
Sammy invested $100,000 in a savings account for 3 years at 8% compounded annually. What is the future value of Sammy's investment?
$124,000
$100,000
$125,971
$108,000
The formula for calculating the present value of a future amount is:
PV= FV+(i*n)
PV= FV*(1 + i)n
PV= FV-(i*n)
PV= FV/(1 + i)n
True or False: The amount invested multiplied by the interest rate is the formula used to determine the future value two years from now.
True
False
James would like to deposit enough money in a savings account to have $8,000 at the end of year 3. Assuming the investment will earn 5% compounded annually, what amount should James deposit in the savings account today? Round your answer to the nearest dollar. (USE EXCEL OR TABLES)
$6,911
$7,619
$6,268
$7,600
On January 1, year 1, Coral deposits $10,000 into a savings account earning 9% interest for 5 years. What is the future value of Coral's investment at the end of year 5? (USE EXCEL OR TABLES)
$15,386
$13,310
$16,771
$14,116
What factors influence the present value of a future amount?
The Future Amount Only
The Interest Rate and the Compounding Periods
The Number of Compounding Periods Only
The Interest Rate Only
$2,000 invested today at 5% compounded annually will grow to $2,100 at the end of one year or $2,205 at the end of two years. What is the initial $2,000 referred to as?
Present Value
Market Value
Future Value
Tortoise Corp. would like to invest enough cash to have $100,000 at the end of year 5. Assume the interest on the investment is compounded annually at 10%. How much does Tortoise need to invest on January 1 of Year 1? (USE EXCEL OR TABLES)
$68,301
$62,092
$90,909
$64,993
As the number of periods increases, present value factors become ______.
Larger
Equal
Smaller
Cindy would like to deposit enough money in a savings account to have $10,000 at the end of year 4. Assuming the investment will earn 5% compounded annually, what amount should Cindy deposit in the savings account today? Round your answer to the nearest dollar. (USE EXCEL OR TABLES)
$9,500
$9,524
$8,548
$8,227
Which of the following are NOT required to compute the present value of a known future amount?
Date
Number of Compounding Periods
Interest Rate
Future Value
The formula 1/(1+i)n is used to calculate _____ value factors.
Future
Market
Present
If the future value of an amount is $40,000 at the end of 4 years, the present value today is $27,320, and the interest is compounded annually, what is the annual interest rate? (USE EXCEL OR TABLES)
7%
8%
9%
10%
Shadow Corp. would like to invest enough cash to have $500,000 at the end of year 3. Assume the interest on the investment is compounded annually at 8%. How much money should Shadow Corp invest today to have $500,000 at the end of year 3? (USE EXCEL OR TABLES)
$367,515
$166,667
$396,915
$500,000
If you want to accumulate $20,000 for a down payment on a condo, and you have $15,400 to invest today at an interest rate of 9% compounded annually, about how many years will it take you to accumulate the desired amount? (USE EXCEL OR TABLES)
2
3
4
5
The higher the time value of money, the ______ is the present value of a future amount because it is ______ desirable to wait to get the money.
lower; less
higher; more
lower; more
higher; less
The formula for calculating the present value of a future amount is:
PV= FV/(1 + i)n
PV= FV+(i*n)
PV= FV-(i*n)
PV= FV*(1 + i)n
Which of the following is an example of a monetary asset?
Inventory
Accounts Receivables
Notes Payables
Accounts Payables
Which of the following is not a monetary liability?
Unearned Revenue
Wages Payables
Notes Payables
Accounts Payables
Suppose $5,000 is borrowed from the bank, and the loan terms require a repayment of $6,299 three years from now. What is the annual interest rate on the loan?
8.0%
6.9%
8.7%
6.7%
What is the primary consideration when valuing monetary receivables and payables?
The future value of the receivable or payable is based on inflation.
The original amount of the receivable or payable.
The current market price of the receivable or payable.
The fixed amount of cash to be received or paid in the future.
Use the following facts to determine the number of periods used in calculating the time value of money: The present value is $29,650, the future value is $50,000, and the interest rate is 11%. The number of periods is approximately
5
6
7
8
The primary reason for valuing the note and inventory at their face value rather than their present value is:
The present value calculation is too complex.
The future cash flows are guaranteed.
The interest rate explicitly stated in the agreement properly reflects the time value of money.
Karel sells goods to customers in exchange for a $100,000 noninterest-bearing note due in 2 years. The interest rate on this type of loan is 8%. What is the present value of the note?
$100,000
$92,593
$85,734
$84,000
What term is used for money and claims to receive money in amounts that are fixed or determinable?
Current Assets
Monetary Assets
Quick Assets
Net Realizable Assets
