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Pre-assessment_Intermediate Accounting I Units 5-7 (JMV1) (PJMV) D103
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Pre-assessment_Intermediate Accounting I Units 5-7 (JMV1) (PJMV) D103
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Pre-assessment:Intermediate Accounting IUnits 5-7 (JMV1) (PJMV) D103
A company deposits $10,000 in a bank where it will earn simple interest of 10%
annually. What is the amount of interest earned in Year 2? - ANS-$1,000
$10,000 x .10 = $1000
A company is putting together a list of transactions that are affected by the time value of
money. Which transaction should be included in this list? - ANS-Long-term leases
A company needs to have $70,000 in cash at the end of four years. The company can
invest the cash now in a money market account that will return 6% interest compounded
annually. Using a 6% interest rate, the implied annual interest is $70,000 × 0.06 =
$4,200. The following information is given:
Assuming an annual interest rate of 4% for 6 years is appropriate, the present value of
the deposit is $70,000 × 0.79031 = $55,322.
Assuming an annual interest rate of 6% for 4 years is appropriate, the present value of
the deposit is $70,000 × 0.79209 = $55,446.
Assuming an annual interest rate of 6% for 6 years is appropriate, the present value of
the deposit is $70,000 × 0.70946 = $49,662.
How much does this company need to deposit today? - ANS-$55,446
1 / (1+.06)^4 = 0.79209
PVFni=present value factor for n periods at i interest
Company A sells a parcel of land to Company B in exchange for a note receivable. The
terms of the note require Company B to make a single payment of $600,000 in two
years. Using a 10% interest rate, the implied annual interest is $600,000 × 0.10 =
$60,000, and the present value of the note is $600,000 × 0.82645 = $495,870. Which
amount must Company A consider as the proceeds from the sale of the land in order to
calculate gross profit or gain/loss on the sale in accordance with generally accepted
accounting principles (GAAP)? - ANS-$495,870
A company performs services for a customer in exchange for a noninterest-bearing
note. The customer agrees to make a payment of $100,000 in three years. Using a 5%
, interest rate, the implied annual interest is $100,000 × 0.05 = $5,000, and the present
value of the note is $100,000 × 0.86384 = $86,384. Which amount must this company
record as service revenue from this transaction in accordance with generally accepted
accounting principles (GAAP)? - ANS-$86,384
A company will receive $10,000 each year in lease payments for the next five years.
The payments will start at the end of the first year. Assuming an annual interest rate of
4% is appropriate, the present value of an ordinary annuity is 4.45182 × $10,000 =
$44,518, and the present value of an annuity due is 4.62989 × $10,000 = $46,299.
Which amount should be recorded for this sale? - ANS-$44,518
A student has saved $40,000 to take a year to study abroad. The cash was deposited
into a money market account earning 2% monthly interest for 12 months. The student
wants to withdraw equal amounts each month at the end of the month for living
expenses. Assuming a monthly interest rate of 2% is appropriate, the present value of
an ordinary annuity is $40,000/10.57534 = $3,782.38, and the present value of an
annuity due is $40,000/10.78685 = $3,708.22. What is the amount that this student
should withdraw each month? - ANS-$3,782.38
A company has the following items:
Cash $ 10,000
Petty cash $ 100
Short term paper $ 1,500
Post dated customer check $ 2,000
Bank overdraft $ 50
How much should be recorded as cash equivalents? - ANS-$1,500
short term paper
A company has the following account balances as of December 31:
trade receivables: $100,000
current notes receivable: $200,000
other receivables (due in six months): $20,000
allowance for doubtful accounts: $20,000
Which amount should be reported as net receivables under current assets on the
balance sheet? - ANS-$300,000
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