Q1. If you set yourself a goal of investing X amount today, earning interest at 10%, in order to withdraw $32,321 at the end of each year for the next four years, how much is X?
$22,075
None of the other alternatives are correct
$102,454
$129,284
$10,196
Q2. Your grand-mother puts $1,000 per year in a TD Bank account for you. She started doing this ten years ago to save for a big graduation trip after completion of high school and before starting university. Money is worth 12%. How much is sitting in the TD bank account as of now? Please round to the nearest whole number.
$17,549
$11,200
$10,000
$56,502
$3,016
Q3. When a firm buys a machine and is offered the following terms ($250,000 payment in full now or ten monthly installments of $28,000), it should
Capitalize the asset at $250,000
Capitalize the asset at $280,000
None of the above
Capitalize the asset at $280,000 but offset this with a contra account for $28,000
Not capitalize the asset until it is fully paid for
Which of the following statements is true?
None of the other alternatives are correct
When time periods are short (less than one year) the time value of money is essential to consider
When time periods are short (less than one year) the time value of money is usually ignored
As time passes, the amount in the Discount account, which is the result of the present value being less than the amount which will ultimately be paid in the future, increases
Money grows linearly with compound interest
Q4. Selden Co. purchases a factory and pays $5,000,000 cash and uses the factory to produce microchips and then a year later turns around and sells the building for the same amount it originally paid. (money is worth 8% compounded quarterly). Selden will record:
A gain on the sale
Not record this as a sale until payment in full is received
There is insufficient information to answer the question
A loss on the sale
Neither a gain nor a loss on the sale
Q5. If you borrowed $1,000 for a 3 year period, with a simple interest rate of 10% per annum, the total interest to be paid would be
$500
$750
$1,000
$300
None of the other alternatives are correct
Q6. A non interest-bearing note that pays $5,000 three years from today is issued in exchange for used equipment. If the discount rate appropriate for such notes is 8% per annum, the entry to record the issue of a note for the used equipment on our books would include a:
Dr Discount on Note Payable $1,031
Dr Used Equipment $5,000
Cr Note Payable $3,969
Cr Discount on Note Payable $1,031
None of the other alternatives are correct
Q7. If you set yourself a goal of investing X amount today, earning interest at 15%, in order to withdraw $10,000 at the end of each year for the next two years, how much is X?
Between $12,000 and $15,000
None of the other alternatives are correct
$20,000
$21,500
$16,257