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Intermediate Accounting: Reporting...

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

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Present Value Computations Using the present value tables, solve the following.

Required:

1. What is the present value on January 1, 2019, of $30,000 due on January 1, 2023, and discounted at 10% compounded annually?

2. What is the present value on January 1, 2019, of $40,000 due on January 1, 2023, and discounted at 11% compounded semiannually?

3. What is the present value on January 1, 2019, of $50,000 due on January 1, 2023, and discounted at 16% compounded quarterly?

1.

To determine

Determine the present value on January 1, 2019, if the amount is discounted annually at 10%.

Explanation

Present value of a single sum:

Present value of a single sum is the today’s amount of future value of a single sum discounted at a rate of interest till particular current date. The process of converting future cash flows to the present value represents discounting.

Future value (FV) –$30,000

Interest rate (i) – 10% per annum

Number of years (n) from January 1, 2019 to January 1, 2023 is 4 years.

Determine the present value (PV) on January 1, 2019, if the amount is discounted annually at 10%...

2.

To determine

Determine the present value on January 1, 2019, if the amount is discounted semiannually at 11%.

3.

To determine

Determine the present value on January 1, 2019, if the amount is discounted quarterly at 16%.

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