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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 Using the present value tables, solve the following problems.

Required:

  1. 1. What is the present value on January 1,2019, of $30,000 due on January 1, 2024, and discounted at 12% compounded annually?
  2. 2. What is the present value on July 1, 2019, of $8,000 due January 1, 2024, and discounted at 16% compounded quarterly?
  3. 3. What is the amount of the present value discount (the difference between future value and prevent value) on $8,000 due at the end of 5 years at 10% compounded annually?

1.

To determine

Determine the present value on January 1, 2019.

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.

Future value –$30,000

Interest rate – 12% per annum, compounded annually

Number of years from January 1, 2019 to January 1, 2024 is 5 years.

Determine the present value on January 1, 2019.

PV=FV×(pn=5,i=12%

2.

To determine

Determine the present value on July 1, 2019.

3.

To determine

Determine the amount of present value discount.

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