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WGU D103 Pre-assessment Intermediate Accounting I Units 5-7 (JMV1) (PJMV) 1.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 2.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 3.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. 1 / 3
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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 4.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 2 / 3
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5.A company performs services for a customer in exchange for a nonin- terest-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
6.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
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