Chapter M, Problem 13RE

### Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Chapter
Section

### Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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# What is the present value on January 1, 2019, of 7 equal future annual receipts of $30,000 if the first receipt is received on January 1, 2019, and the interest rate is 10% compounded annually? To determine Determine the present value on January 1, 2019. Explanation Future Value: The future value is value of present amount compounded at an interest rate until a particular future date. n – 7 equal future annual receipts C –$30,000 Cash flow

I –Interest rate 10% compounded annually.

First cash flow (cash receipts) received on January 1, 2019. Now, present value as on January 1, 2019 yet to be calculated. Here, the cash flow occurs during the first day of each time period, hence it is an annuity due.

Determine the present value ordinary annuity.

Present valueD= Cash flow ×(pDn=7,i=10%<

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