QUIZ#6
Question 1
1. Which of the following transactions would require the use of the present value of an
annuity due concept in order to calculate the present value of the asset obtained or
liability owed at the date of incurrence?
A. A capital lease is entered into with the initial lease payment due one month
subsequent to the signing of the lease agreement.
B. A ten-year 8% bond is issued on January 2 with interest payable semiannually on
July 1 and January 1 yielding 9%.
C. A capital lease is entered into with the initial lease payment due upon the signing
of the lease agreement.
D. A ten-year 8% bond is issued on January 2 with interest payable semiannually on
July 1 and January 1 yielding 7%.
1 points
Question 2
1. What best describes the time value of money?
A. Accounts receivable that are determined uncollectible.
B. An investment in a checking account.
C. The interest rate charged on a loan.
D. The relationship between time and money.
1 points
Question 3
1. Which of the following situations does not base an accounting measure on present
values?
A. Pensions.
B. Leases.
C. Prepaid insurance.
D. Sinking funds.
1 points
Question 4
1. What is interest?
A. An equity investment.
B. Payment for the use of money.
C. Loan.
D. Return on capital.
1 points
Question 5
1. What is not a variable that is considered in interest computations?
A. Assets.
B. Interest rate.
C. Principal.
D. Time.
1 points
Question 6
1. If you invest $50,000 to earn 8% interest, which of the following compounding
approaches would return the lowest amount after one year?
A. Daily.
B. Monthly.
C. Annually.
D. Quarterly.
1 points
Question 7
1. Which factor would be greater — the present value of $1 for 10 periods at 8% per period
or the future value of $1 for 10 periods at 8% per period?
A. Present value of $1 for 10 periods at 8% per period.
B. Future value of $1 for 10 periods at 8% per period.
C. The factors are the same.
D. Need more information.
1 points
Question 8
1. Which of the following tables would show the smallest value for an interest rate of 5%
for six periods?
A. Present value of an ordinary annuity of 1
B. Future value of 1
C. Present value of 1
D. Future value of an ordinary annuity of 1
1 points
Question 9
1. Which table would you use to determine how much you would need to have deposited
three years ago at 10% compounded annually in order to have $1,000 today?
A. Future value of an annuity due of 1
B. Future value of 1 or present value of 1
C. Future value of an ordinary annuity of 1
D. Present value of an ordinary annuity of 1
1 points
Question 10
1. Which table would you use to determine how much must be deposited now in order to
provide for 5 annual withdrawals at the beginning of each year, starting one year hence?
A. Future value of an ordinary annuity of 1
B. Future value of an annuity due of 1
C. Present value of an annuity due of 1
D. None of these answer choices are correct.
1 points
Question 11
1. Which table has a factor of 1.00000 for 1 period at every interest rate?
A. Future value of an ordinary annuity of 1
B. Present value of 1
C. Future value of 1
D. Present value of an ordinary annuity of 1
1 points
Question 12
1. Which table would show the largest factor for an interest rate of 8% for five periods?
A. Future value of an ordinary annuity of 1
B. Present value of an annuity due of 1
C. Future value of an annuity due of 1
D. Present value of an ordinary annuity of 1
1 points
Question 13
1. Which of the following tables would show the smallest factor for an interest rate of 10%
for six periods?
A. Future value of an annuity due of 1
B. Future value of an ordinary annuity of 1
C. Present value of an annuity due of 1
D. Present value of an ordinary annuity of 1
1 points
Question 14
1. The figure .94232 is taken from the column marked 2% and the row marked three periods
in a certain interest table. From what interest table is this figure taken?
A. Present value of 1
B. Present value of annuity of 1
C. Future value of annuity of 1
D. Future value of 1
1 points
Question 15
1. Which of the following tables would show the largest value for an interest rate of 10% for
8 periods?
A. Future amount of an ordinary annuity of 1 table.
B. Future amount of 1 table.
C. Present value of an ordinary annuity of 1 table.
D. Present value of 1 table.
1 points
Question 16
1. On June 1, 2014, Pitts Company sold some equipment to Gannon Company. The two
companies entered into an installment sales contract at a rate of 8%. The contract required
8 equal annual payments with the first payment due on June 1, 2014. What type of
compound interest table is appropriate for this situation?
A. Future amount of an ordinary annuity of 1 table.
B. Present value of an ordinary annuity of 1 table.
C. Present value of an annuity due of 1 table.
D. Future amount of 1 table.
1 points
Question 17
1. Which of the following transactions would best use the present value of an annuity due of
1 table?
A. Babbitt, Inc. wants to deposit a lump sum to accumulate $50,000 for the
construction of a new parking lot in 4 years.
B. Edmiston Co. rents a warehouse for 7 years with annual rental payments of
$120,000 to be made at the end of each year.
C. Fernetti, Inc. rents a truck for 5 years with annual rental payments of $20,000 to
be made at the beginning of each year.
D. Durant, Inc. borrows $20,000 and has agreed to pay back the principal plus
interest in three years.
1 points
Question 18
1. A series of equal receipts at equal intervals of time when each receipt is received at the
beginning of each time period is called an
A. unearned receipt.
B. annuity in arrears.
C. annuity due.
D. ordinary annuity.
1 points
Question 19
1. In the time diagram below, which concept is being depicted?
A. Future value of an annuity due
B. Future value of an ordinary annuity
C. Present value of an annuity due
D. Present value of an ordinary annuity
1 points
Question 20
1. On December 1, 2014, Richards Company sold some machinery to Fleming Company.
The two companies entered into an installment sales contract at a predetermined interest
rate. The contract required four equal annual payments with the first payment due on
December 1, 2014, the date of the sale. What present value concept is appropriate for this
situation?
A. Present value of an ordinary annuity of 1 for four periods
B. Future amount of an annuity of 1 for four periods
C. Future amount of 1 for four periods
D. Present value of an annuity due of 1 for four periods.
1 points
Question 21
1. An amount is deposited for eight years at 8%. If compounding occurs quarterly, then the
table value is found at
A. 2% for 32 periods.
B. 8% for 32 periods.
