The present value of US $100, 000 due at the end of eight years. at 10%. is US $46.650. What is the approximate value of US $100.000 invested for the same length of time and at the same rate?
Answer(s): D
The present value of a future amount equals that amount divided by the interest factor for the given discount period and discount rate. The interest factor for the present value of I due in 8 years and discounted at 10% is 2.1436US $100, 000 $46, 650). Thus the future value of US $100.000 must be US $214.360$100.008 x 1436).
A company purchased a new machine on an installment payment plan and is to make equal annual payments beginning one year from the date of purchase. Using an interest rate of 10%, the cost of the machine can be determined by multiplying one payment by the
The cost of the machine is the present value of the annuitythe series of equal periodic payments). The annuity is an ordinary annuity because the payments begin one period after the date of purchase. The cost therefore equals the periodic payment times the interest factor for an ordinary annuity of one currency unit for a specified number of equal periodic payments discounted at a given interest rate.
The purpose of an entry that contains a debit to prepaid property taxes and a credit to property tax expense is to recognize a(n)
Answer(s): A
An entry debiting prepaid property taxes and crediting property tax expense is needed at the balance sheet date when prepayments are initially recorded in an expense account. This adjusting entry defers expense recognition to the future period in which the property taxes apply.
What are the effects of an adjusting entry used to accrue revenue from credit sales?
Answer(s): B
The journal entry to accrue revenue requires a debit to a receivable account and a credit to a revenue account. Thus, the accrual of revenue increases assets and equity.
The practice of recording advance payments from customers as a liability is an example of applying the
Recognition of revenue occurs when the flow of future economic benefits to the enterprise is probable and such benefits are reliably measurable. Recording advance payments as a Ii ability reflects a determination that the receipt of future economic benefits is not sufficiently certain to merit revenue recognition, given that the enterprise has not yet performed its obligations.
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