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Concept explainers
(1)
Present value:
Present value refers to the present worth of the money that is received in future in a lump sum or as series of cash flows at a specified interest rate. When these future sums of money are discounted at a higher rate, the present value of the future cash flows gets lower.
Future Value: The future value is value of present amount compounded at an interest rate until a particular future date. The future value of an amount is calculated by using the following formula:
To determine: The single amount that J will invest on December 31, 2018.
(2)
The required amount of each deposit when J makes five equal deposits.
(3)
The required amount when J makes five equal deposits on each December 31, beginning on December 31, 2018.
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Chapter 6 Solutions
INTERMEDIATE ACCOUNTING (LL) W/CONNECT
- Mr. X will retire at the age of 60 years. He wishes to have an amount of $200,000 in his account at the time of retirement. Currently he is of the age of 40 years and has an amount of $25,000 in hand. How much interest rate a bank should offer so he has the desired amount at retirement. A. 11.00% В. 10.50% C. 10.96% D. 12.00%arrow_forwardQuestion 2 Pam Beesly is 39 years old today and she wishes to accumulate $513,000 by her 63rd birthday so she can retire. She wishes to accumulate this amount by making equal deposits on her 39th through her 62th birthdays. What annual deposit must Pam make if the fund will earn 8% interest compounded annually? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Pam must make an annual deposit of $?arrow_forward11. If Jennifer contributes $500 every quarter into her superannuation fund for the next 45 years, how much will she accumulate assuming she can earn 8% p.a. and the first contribution is made immediately? Select one: a. $652,810.16 b. $875,181.20 c. $858,020.78 d. $90,000.00arrow_forward
- May I ask for an explanation and solution to the question for a better understanding. Thank you! 10. You inherit P150,000 from your aunt. You decide to invest the money in a three-year certificate of Deposit (CD) that pays 4% interest, compounding quarterly, to use as a down payment on a house. How much money will you have when the CD matures? a. P506,188.80 b. P169,023.75 c. P168,729.60 d. P674,918.40arrow_forwardMr. X will retire at the age of 60 years. He wishes to have an amount of S200,000 in his account at the time of retirement. Currently he is of the age of 40 years and has an amoun of S25,000 in hand. How much interest rate a bank should offer so he has the desired amount at retirement. A. 11.00%. B10.50% C. 10.96% D. 12.00%arrow_forwardQUESTION 5 Your client is currently 21 years old. The interest rate on the funds your client has available is 3.90%. Your client can make annual contributions of $6,000 per year. Your client wishes to retire at the age of 67 and has an expected lifetime of 89. Calculate the annual payment your client can receive in retirement. O a. $47,085 O b. $50,738 O c. $54,691 O d. $58,966 O e. $63,593arrow_forward
- Question 6 John Adams plans to retire at the age of 62. He wants an annual income of $60,000 per year. He believes that he will live to be 87. He will draw the money at the beginning of each year. How much money will he need when he retires in order to support his $60,000 annual life style if he will average 12 percent per year on his retirement account? a. $527,059 b. $470,586 c. $439,800 d. $505,302arrow_forward? You would like to have enough money saved to receive a $53,000 per year perpetuity after retirement. How much would you need to have saved in your retirement fund to achieve this goal? Assume that the perpetuity payments start on the day of your retirement. The annual interest rate is 8 percent. O -00 Multiple Choice $715,500 $1,060,000 $530,000arrow_forwardhw 3 10) Upon graduating from college 35 years ago, Dr. Nick Riviera was already planning for his retirement. Since then, he has made deposits into a retirement fund on a quarterly basis in the amount of $250. Nick has just completed his final payment and is at last ready to retire. His retirement fund has earned 9 percent compounded quarterly. Use five decimal places for the periodic interest rate in your calculations. a. How much has Nick accumulated in his retirement account? b. In addition to this, 15years ago Nick received an inheritance check for $20,000 from his beloved uncle. He decided to deposit the entire amount into his retirement fund. What is his current balance in the fund? Part 1 a. The amount Nick has accumulated in his retirement account is $_____arrow_forward
- Kevin deposits $856.89 each quarter into an annuity account for his child's college fund in order to accumulate a future value of $75,000 in 16 years. How much of the $75,000 wilI Kevin ultimately deposit in the account, and how much is interest earned? Round your answers to the nearest cent, if necessary. Formulas 中 Answer(How to Enter) Keypad Present Value Formula Keyboard Shortcuts A PV = (1+) nt Annuity Formula for Finding Future Value nt FV = PMT . Annuity Formula for Finding Payment Amounts PMT = = FV . nt Prev Nextarrow_forwardLily Bobtail wishes to leave a provision in her will that $2 000 will be paid annually in perpetuity to a local charity. How much must she provide in her will for this perpetuity if the interest rate is 6% per annum? a. $33,333.33 b. $50,000 c. $40,000 d. $66,666.67arrow_forwardSuppose you deposited $39,000 in a bank account that pays 5.25% with daily compounding based on a 360-day year. How much would be in the account after 8 months, assuming each month has 30 days? Select the correct answer. O a. $40,389.07 O b. $40,375.67 O c. $40,402.47 d. $40,368.97 Oe. $40,382.37arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
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