Chapter M, Problem 5E

### 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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# Cash Flow Amounts Six equal annual contributions are made to a fund, with the first deposit on December 31, 2019.Required:Using the future value tables, determine the equal contributions that, if invested at 10% compounded annually, will accumulate to a fund of $30,000 on December 31, 2024. To determine Determine the required equal contribution. Explanation Annuity: An annuity is referred as a sequence of payment of fixed amount of cash flows that occurs over the equal intervals of time. Cash flow occurs during the first day of each time period is known as an annuity due, whereas cash flow occurs during the last day of each time period is known as an ordinary annuity. Future ValueO –$30,000

n – 6 annual cash flows

I –Interest rate 10% compounded annually.

Here, the first cash flow starts on December 31, 2019 and ends on December 31, 2024. Also, it is given that equal contribution has to be made to accumulate a fund of \$30,000 as on December 31, 2024. Since, it is observed that the cash flow occurs during the last day of each time period, it is an ordinary annuity.

Determine the required equal contribution...

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