Accounting ACCT 2610 Lecture 9: Chapter Nine Pt. 2

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oliveleopard31

3 Nov 2016

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Present value concepts: present value is the current value of an amount to be received in the future. A future amount discounted for compound interest. Money received today is worth more than money to be received one year from now. Present value = [ 1/(1 + i)^n ] * amount: an annuity is a series of periodic cash receipts or payments that are equal in amount each interest period. An equal dollar amount each interest period. An equal interest rate in each interest period: single payment. Note payable (+l: interest expense (+e, -se) present value * interest rate. Note payable (+l: interest expense (+e, -se) (present value + first interest)*rate. Note payable (-l: interest expense (-e, +se) (calculated amount) * rate. Cash (-a) annual installment: note payable (-l) Interest expense (calculated - first expense) * rate. Interest expense (calculated - first - second) * rate.

Related Questions

If a single future amount of $800 is to be received in 3 yearsand discounted at 6%, its present value is

$754.72.

$693.36.

$752.00.

$671.70.

A $50,000, 5-year note payable that pays 8% interest quarterlywould be discounted back to its present value by using tables thatwould indicate which one of the following period and interestcombinations?

5 interest periods and 8% interest.

20 interest periods and 8% interest.

20 interest periods and 2% interest.

5 interest periods and 2% interest

The amount of interest involved in any financing transaction isbased on each of the following except the

interest rate.

time.

principal.

present value of 1 factor.

Time Value of Money: Basics
Using Table 12A.1 and Table 12A.2 of this chapter, determine the answers to each of the following independent situations. (Round answers to the nearest whole number.)

(a) The future value in three years of $1,000 deposited today in a savings account with interest compounded annually at 8 percent.

(b) The present value of $5,000 to be received in five years, discounted at 10 percent.

(d) An initial investment of $14,904 is to be returned in eight equal annual payments. Determine the amount of each payment if the interest rate is 12 percent.

(e) A proposed investment will provide cash flows of $50,000, $10,000, and $7,000 at the end of Years 1, 2, and 3, respectively. Using a discount rate of 20 percent, determine the present value of these cash flows.

(f) Find the present value of an investment that will pay $7,000 at the end of Years 10, 11, and 12. Use a discount rate of 12 percent.

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Select the term that best fits each of the following definitions and descriptions.

a.	Notes receivable
b.	Nontrade receivables
c.	Net realizable value
d.	Direct write-off method
e.	Interest-bearing note
f.	Maturity date
g.	Promissory note
h.	Factoring receivables
i.	Trade discount
j.	Present value
k.	Allowance method
l.	Sales discount
m.	Negotiable note
n.	Non-interest-bearing note
o.	Assignment of receivables
p.	Valuation date

____ 21. Receivables that are evidenced by a formal written promise to pay a certain sum of money at a specified date.

____ 22. The date the principal amount of a note is due to be paid.

____ 23. The sum of future receipts or payments discounted to the present date at an appropriate rate of interest.

____ 24. A method of recognizing the estimated losses from uncollectible accounts as expenses during the period in which the sales occur.

____ 25. A note that is legally transferable by endorsement and delivery.

____ 26. Any receivable arising from transactions that are not directly associated with the normal operating activities of a business.

____ 27. A note written in the form where the face amount includes the interest charges.

____ 28. The borrowing of money with receivables pledged as security on the loan.

____ 29. A note written in the form where the maker promises to pay the face amount plus interest at a specified rate.

____ 30. An unconditional written promise to pay a certain sum of money at a specified time.

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Accounting ACCT 2610 Lecture 9: Chapter Nine Pt. 2

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