CHAPTER 6 ACCOUNTING AND THE TIME VALUE OF MONEY IFRS questions are available at the end of this chapter WITH CORRECT ANSWERS

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22. What best describes the time value of money? a. The interest rate charged on a loan. b. Accounts receivable that are determined uncollectible. c. An investment in a checking account. d. The re... lationship between time and money. Ans: d, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Investment Decisions, IFRS: None 23. Which of the following situations does not base an accounting measure on present values? a. Pensions. b. Prepaid insurance. c. Leases. d. Sinking funds. Ans: b, LO: 1, Bloom: K, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Investment Decisions, IFRS: None 24. What is interest? a. Payment for the use of money. b. An equity investment. c. Return on capital. d. Loan. Ans: a, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Investment Decisions, IFRS: None 25. What is not a variable that is considered in interest computations? a. Principal. b. Interest rate. c. Assets. d. Time. Ans: c, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Investment Decisions, IFRS: None 26. 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. Quarterly. d. Annually. 6 - 10 Test Bank for Intermediate Accounting, Sixteenth Edition Ans: d, LO: 1, Bloom: C, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Investment Decisions, IFRS: None 27. 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. Ans: b, LO: 1, Bloom: C, Difficulty: Difficult, Min: 3, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Investment Decisions, IFRS: None 28. Which of the following tables would show the smallest value for an interest rate of 5% for six periods? a. Future value of 1 b. Present value of 1 c. Future value of an ordinary annuity of 1 d. Present value of an ordinary annuity of 1 Ans: b, LO: 1, Bloom: C, Difficulty: Difficult, Min: 3, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Investment Decisions, IFRS: None 29. Which table would you use to determine what amount was deposited three years ago to provide $1,000 today? a. Future value of 1 or present value of 1 b. Future value of an annuity due of 1 c. Future value of an ordinary annuity of 1 d. Present value of an ordinary annuity of 1 Ans: a, LO: 1, Bloom: C, Difficulty: Moderate, Min: 3, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Investment Decisions, IFRS: None 30. 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 from the first deposit? 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. Present value of an ordinary annuity of 1. Ans: d, LO: 1, Bloom: C, Difficulty: Moderate, Min: 3, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Investment Decisions, IFRS: None 31. Which table has a factor of 1.00000 for 1 period at every interest rate? a. Future value of 1 b. Present value of 1 c. Future value of an ordinary annuity of 1 d. Present value of an ordinary annuity of 1 Ans: c, LO: 1, Bloom: C, Difficulty: Moderate, Min: 3, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Investment Decisions, IFRS: None Accounting and the Time Value of Money 6 - 11 32. 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 ordinary annuity of 1 c. Future value of an annuity due of 1 d. Present value of an annuity due of 1 Ans: c, LO: 1, Bloom: C, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Investment Decisions, IFRS: None 33. Which of the following tables would show the smallest factor for an interest rate of 10% for six periods? a. Future value of an ordinary annuity of 1 b. Present value of an ordinary annuity of 1 c. Future value of an annuity due of 1 d. Present value of an annuity due of 1 Ans: b, LO: 1, Bloom: C, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Investment Decisions, IFRS: None 34. The figure .94232 is taken from the column marked 2% and the row marked three periods in a certain interest table. From what in [Show More]

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