[ACCT I S 100] - Final Exam Guide - Comprehensive Notes for the exam (93 pages long!)

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tanfly138

29 Nov 2016

School

UW-Madison

Department

Accounting And Info Systems

Course

ACCT I S 100

Professor

Warfield Terry

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Document Summary

Time value of money prefer to receive money today rather than the same amount in the future because of the interest factor: interest is the difference between the amount borrowed (the principal) and the amount repaid. The amount of interest depends on: principal (p) the original amount borrowed, interest rate (i) annual percentage of principal, time (n) the number of year principal is borrowed. Simple interest computed on the principal amount only: interest = p * i * n. Compound interest computed on the principal plus any interest earned that has not been paid: so the interest is computed on the accumulated balance every year. Present value of an annuity: the value now of a series of future receipts/payments, discounted with compound interest. Need to know the 1) discount rate, 2) number of discount periods & 3)the amount of payments/receipts: when the amount is the same each period you can use table 4 on page d-10 for the present.

Related Questions

If a single future amount of $800 is to be received in 3 yearsand discounted at 6%, its present value is

$754.72.

$693.36.

$752.00.

$671.70.

A $50,000, 5-year note payable that pays 8% interest quarterlywould be discounted back to its present value by using tables thatwould indicate which one of the following period and interestcombinations?

5 interest periods and 8% interest.

20 interest periods and 8% interest.

20 interest periods and 2% interest.

5 interest periods and 2% interest

The amount of interest involved in any financing transaction isbased on each of the following except the

interest rate.

time.

principal.

present value of 1 factor.

Select the term that best fits each of the following definitions and descriptions.

a.	Notes receivable
b.	Nontrade receivables
c.	Net realizable value
d.	Direct write-off method
e.	Interest-bearing note
f.	Maturity date
g.	Promissory note
h.	Factoring receivables
i.	Trade discount
j.	Present value
k.	Allowance method
l.	Sales discount
m.	Negotiable note
n.	Non-interest-bearing note
o.	Assignment of receivables
p.	Valuation date

____ 21. Receivables that are evidenced by a formal written promise to pay a certain sum of money at a specified date.

____ 22. The date the principal amount of a note is due to be paid.

____ 23. The sum of future receipts or payments discounted to the present date at an appropriate rate of interest.

____ 24. A method of recognizing the estimated losses from uncollectible accounts as expenses during the period in which the sales occur.

____ 25. A note that is legally transferable by endorsement and delivery.

____ 26. Any receivable arising from transactions that are not directly associated with the normal operating activities of a business.

____ 27. A note written in the form where the face amount includes the interest charges.

____ 28. The borrowing of money with receivables pledged as security on the loan.

____ 29. A note written in the form where the maker promises to pay the face amount plus interest at a specified rate.

____ 30. An unconditional written promise to pay a certain sum of money at a specified time.

ochrecricket36

The Landers Corporation needs to raise $1.6 million of debt on a 20-year issue. If it places the bonds privately, the

interest rate will be 10 percent. Twenty thousand dollars in out-of-pocket costs will be incurred. For a public issue,

the interest rate will be 9 percent, and the underwriting spread will be 2 percent. There will be $120,000 in

out-of-pocket costs. Assume interest on the debt is paid semiannually, and the debt will be outstanding for the

full 20-year period, at which time it will be repaid.

Which plan offers the higher net present value? For each plan, compare the net amount of funds initially

availableâinflowâto the present value of future payments of interest and principal to determine net present

value. Assume the stated discount rate is 12 percent annually, but use 6 percent semiannually throughout the

analysis. (Disregard taxes.)

greendinosaur896

[ACCT I S 100] - Final Exam Guide - Comprehensive Notes for the exam (93 pages long!)

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