ACC 342 Lecture Notes - Lecture 12: Cash Flow

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indigolion532

18 May 2018

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Time value of money

Money can be invested today to earn interest and grow to a larger dollar amount in the future

Future value

The value amount in which a dollar will grow to at some point in time

Monetary assets

Include money and claims to receive money in the future, the amount of which is fixed or determinable

EXAMPLE:

Cash and most receivables

Monetary Liabilities

Obligations to pay amounts of cash in the future, the amount of which is fixed or determinable

EXAMPLE

Notes payable

An ordinary due

A series of equal payments in which the first payment is made one compounding period after the date

of the contract

Deferred annuity

A series of equal period payments that starts more than one period after the agreement

The exclusive right to benefit from a creative work, such as a film

Property, Plant, and equipment and intangible assets

Long-term revenue producing assets

Donated assets are recorded at

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Document Summary

Money can be invested today to earn interest and grow to a larger dollar amount in the future. The value amount in which a dollar will grow to at some point in time. Include money and claims to receive money in the future, the amount of which is fixed or determinable. Obligations to pay amounts of cash in the future, the amount of which is fixed or determinable. A series of equal payments in which the first payment is made one compounding period after the date of the contract. A series of equal period payments that starts more than one period after the agreement. The exclusive right to benefit from a creative work, such as a film. Productive assets that are physically consumed in operations. The excess of the fair value of a business over the fair value of all net identifiable assets. Assets acquired in a lump-sum purchase are valued based on.

Related Questions

1 Accounting

The following are 10 technical accounting terms.

Net present value Capital budgeting Incremental analysis Discount rate Payback period Present value Sunk cost Salvage value Return on average investment Capital budget audit Each of the following statements may (or may not) describe one of these technical terms.

For each statement, indicate the accounting term described, or answer âNoneâ if the statement does not correctly describe any of the terms.

a the examination of difference among revenue, costs, and cash flows under alternative courses of actions

b a cost incurred in the past that cannot be changed as a result of future actions

c the process of planning and evaluating proposals for investments in plan assets

d the average annual net income from an investment expresses as a percentage of the average amount invested

e the length of time necessary to recover the entire cost of an investment from resulting annual net cash flows

f the present value of investment's expected future cash flows

g the amount of the money today that is considered equivalent to the cash flows expected to take place in the future

h the required rate of return used by an investor to discount future cash flows to their present value

i often an investment's final cash flows to be considered in discounted cash flow analysis

scarletworm172

1. Creditors' claims on the assets of a company are called: (Points : 2)

2. The primary objective of financial accounting is: (Points : 2)

To serve the decision-making needs of internal users

To provide financial statements to help external users analyze and interpret an organization's activities

To monitor and control company activitiesTo provide information on both the costs and benefits of managing products and services

To know what, when and how muchto produce

3. Assets created by selling goods and services on credit are: (Points : 2)

4. The debt ratio is used: (Points : 2)

To measure the amount of equity relative to the expenses

To reflect the risk associated with a company's debts

Only by banks when a business applies for a loan

To determine how much debt a firm should pay off

5. Net Income: (Points : 2)

Decreases equity

Represents the amount of assets owners put into a business

Equals assets minus liabilities

Is the excess of revenues over expenses

Represents the owners' claims against assets

6. Internal users of accounting information include: (Points : 2)

Shareholders

Customers

Creditors

Government regulators

Line Supervisor

7. Risk is: (Points : 2)

Net income divided by average total assets

The reward for investment

The uncertainty about the expected return that will be earned from an investment

Unrelated to expected return

8. An example of an operating activity is: (Points : 2)

Paying wages

Purchasing office equipment

Borrowing money from a bank

Selling stock

Paying off a loan

9. Which accounting assumption assumes that all accounting information is reported monthly or yearly? (Points : 2)

Business entity assumption

Monetary unit assumption

Value assumption

Cost assumption

Time period assumption

10. Distributions of assets by a business to its stockholders are called: (Points : 2)

On January 1, 2016, Glanville Company sold goods to OtterCorporation. Otter signed an installment note requiring payment of$15,000 annually for six years. The first payment was made onJanuary 1, 2016. The prevailing rate of interest for this type ofnote at date of issuance was 8%.

Glanville should record sales revenue in January 2016 of:

None of these answer choices is correct.

$90,000.

$74,891.

$69,343.

Yamaha Inc. hires a new chief financial officer and promises topay him a lump-sum bonus four years after he joins the company. Thenew CFO insists that the company invest an amount of money at thebeginning of each year in a 7% fixed rate investment fund to insurethe bonus will be available. To determine the amount that must beinvested each year, a computation must be made using the formulafor:

None of these answer choices is correct.

The future value of an annuity due.

The future value of a deferred annuity.

The future value of an ordinary annuity

Incognito Company is contemplating the purchase of a machinethat provides it with net after-tax cash savings of $92,000 peryear for five years. Interest is 10%. Assume the cash savings occurat the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1,FVAD of $1 and PVAD of $1)

a)alculate the present value of the cash savings

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ACC 342 Lecture Notes - Lecture 12: Cash Flow

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