,Solution manual for Accounting: Tools for Business Decision Making, 7th
Edition Paul D. Kimmel
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, APPENDIX G
Time Value of Money
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE G-1
(a) Interest = p X i X n
I = $6,000 X .05 X 12 years
I = $3,600
Accumulated amount = $6,000 + $3,600 = $9,600
(b) Future value factor for 12 periods at 5% is 1.79586 (from Table 1)
Accumulated amount = $6,000 X 1.79586 = $10,775.16
LO 1 BT: AP Difficulty: Easy TOT: 6 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE G-2
(1) Case A 5% 3 periods (2) Case A 3% 8 periods
Case B 6% 8 periods Case B 4% 12 periods
LO 1 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Reporting
BRIEF EXERCISE G-3
FV = p X FV of 1 factor
= $9,600 X 1.60103
= $15,369.89
LO 1 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only) G-1
,BRIEF EXERCISE G-4
FV of an annuity of 1 = p X FV of an annuity factor
= $78,000 X 13.18079
= $1,028,101.62
LO 1 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE G-5
FV = (p X FV of 1 factor) + (p X FV of an annuity factor)
= ($8,000 X 2.40662) + ($1,000 X 28.13238)
= $19,252.96 + $28,132.38
= $47,385.34
[(p X FV of 1 factor) + (p X FV of an annuity factor) = FV]
[($8,000 X 2.40662) + ($1,000 X 28.13238) = $47,385.34
LO 1 BT: AP Difficulty: Medium TOT: 6 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE G-6
FV = p X FV of 1 factor
= $35,000 X 1.46933
= $51,426.55
LO 1 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE G-7
(a) (b)
(1) 12% 7 periods
4% 22 periods
5% 16 periods
(2) 10% 20 periods
10% 7 periods
3% 10 periods
G-2 Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only)
,LO 2 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Reporting
BRIEF EXERCISE G-8
(a) i = 10%
? $25,000
0 1 2 3 4 5 6 7 8 9
Discount rate from Table 3 is .42410 (9 periods at 10%). Present value
of $25,000 to be received in 9 years discounted at 10% is therefore
$10,602.50 ($25,000 X .42410).
(PV of an amount = Amount X PV of 1 factor)
($10,602.50 = $25,000 X .42410)
(b) i = 9%
? $25,000 $25,000 $25,000 $25,000 $25,000 $25,000
0 1 2 3 4 5 6
Discount rate from Table 4 is 4.48592 (6 periods at 9%). Present value of
6 payments of $25,000 each discounted at 9% is therefore $112,148.00
($25,000 X 4.48592).
(PV of an annuity = Annuity X PV of an annuity factor)
($112,148.00 = $25,000 X 4.48592)
LO 2 BT: AP Difficulty: Easy TOT: 5 min. AACSB: Analytic AICPA FC: Reporting
Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only) G-3
,BRIEF EXERCISE G-9
i = 8%
? $900,000
0 1 2 3 4 5 6
Discount rate from Table 3 is .63017 (6 periods at 8%). Present value of
$900,000 to be received in 6 years discounted at 8% is therefore $567,153
($900,000 X .63017). Messi Company should therefore invest $567,153
to have $900,000 in six years.
(PV of an amount = Amount X PV of 1 factor)
($567,153.00 = $900,000 X .63017)
LO 2 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE G-10
i = 6%
? $450,000
0 1 2 3 4 5 6 7 8
Discount rate from Table 3 is .62741 (8 periods at 6%). Present value of
$450,000 to be received in 8 years discounted at 6% is therefore $282,334.50
($450,000 X .62741). Lloyd Company should invest $282,334.50 to have
$450,000 in eight years.
(PV of an amount = Amount X PV of 1 factor)
($282,334.50 = $450,000 X .62741)
LO 2 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
G-4 Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only)
,BRIEF EXERCISE G-11
i = 8%
? $40,000 $40,000 $40,000 $40,000 $40,000 $40,000
0 1 2 3 4 14 15
Discount rate from Table 4 is 8.55948. Present value of 15 payments of
$40,000 each discounted at 8% is therefore $342,379.20 ($40,000 X 8.55948).
Robben Company should pay $342,379.20 for this annuity contract.
(PV of an annuity = Annuity X PV of an annuity factor)
($342,379.20 = $40,000 X 8.55948)
LO 2 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE G-12
i = 5%
? $80,000 $80,000 $80,000 $80,000 $80,000 $80,000
0 1 2 3 4 5 6
Discount rate from Table 4 is 5.07569. Present value of 6 payments of $80,000
each discounted at 5% is therefore $406,055.20 ($80,000 X 5.07569). Kaehler
Enterprises invested $406,055.20 to earn $80,000 per year for six years.
(PV of an annuity = Annuuity X PV of an annuity factor)
($406,055.20 = $80,000 X 5.07569)
LO 2 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only) G-5
,BRIEF EXERCISE G-13
i = 10%
? $400,000
Diagram
for
Principal
0 1 2 3 4 9 10
i = 10%
? $44,000 $44,000 $44,000 $44,000 $44,000 $44,000
Diagram
for
Interest
0 1 2 3 4 9 10
Present value of principal to be received at maturity:
$400,000 X 0.38554 (PV of $1 due in 10 periods
at 10% from Table 3) ............................................................ $154,216*
Present value of interest to be received annually
over the term of the bonds: $44,000* X 6.14457
(PV of $1 due each period for 10 periods at 10%
from Table 4) ........................................................................ 270,361**
Present value of bonds ............................................................... $424,577**
*$400,000 X .11
**Rounded.
[PV of bond = (Face value of bond X PV of 1 factor) + (Annual interest X PV of an annuity factor)]
[$424,577 = ($400,000 X 0.38554) + ($44,000 X 6.14457)]
LO 2 BT: AP Difficulty: Medium TOT: 10 min. AACSB: Analytic AICPA FC: Reporting
G-6 Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only)
,BRIEF EXERCISE G-14
The bonds will sell at a discount (for less than $400,000). This may be proven
as follows:
Present value of principal to be received at maturity:
$400,000 X .32197 (PV of $1 due in 10 periods
at 12% from Table 3) ............................................................ $128,788*
Present value of interest to be received annually
over the term of the bonds: $44,000 X 5.65022
(PV of $1 due each period for 10 periods at 12%
from Table 4) ........................................................................ 248,610*
Present value of bonds ............................................................... $377,398*
*Rounded.
[PV of bond = (Face value of bond X PV of 1 factor) + (Annual interest X PV of an annuity factor]
[$377,398 = ($400,000 X .32197) + ($44,000 X 5.65022)]
LO 2 BT: AP Difficulty: Medium TOT: 10 min. AACSB: Analytic AICPA FC: Reporting
Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only) G-7
, BRIEF EXERCISE G-15
i = 6%
? $75,000
Diagram
for
Principal
0 1 2 3 4 5 6
i = 6%
? $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Diagram
for
Interest
0 1 2 3 4 5 6
Present value of principal to be received at maturity:
$75,000 X .70496 (PV of $1 due in 6 periods
at 6% from Table 3) ............................................................. $52,872.00
Present value of interest to be received annually
over the term of the note: $3,000* X 4.91732
(PV of $1 due each period for 6 periods at
6% from Table 4) ................................................................. 14,751.96
Present value of note received .................................................. $67,623.96
*$75,000 X .04
[PV of note = (PV of principal X PV of 1 factor ) + (Annual interest X PV of an annuity factor)]
[$67,623.96 = ($75,000 X .70496) + ($3,000 X 4.91732)]
LO 2 BT: AP Difficulty: Medium TOT: 10 min. AACSB: Analytic AICPA FC: Reporting
G-8 Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only)
Edition Paul D. Kimmel
Hello all ,
We have all what you need with best price
Our email :
Our website :
testbanks-store.com
, APPENDIX G
Time Value of Money
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE G-1
(a) Interest = p X i X n
I = $6,000 X .05 X 12 years
I = $3,600
Accumulated amount = $6,000 + $3,600 = $9,600
(b) Future value factor for 12 periods at 5% is 1.79586 (from Table 1)
Accumulated amount = $6,000 X 1.79586 = $10,775.16
LO 1 BT: AP Difficulty: Easy TOT: 6 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE G-2
(1) Case A 5% 3 periods (2) Case A 3% 8 periods
Case B 6% 8 periods Case B 4% 12 periods
LO 1 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Reporting
BRIEF EXERCISE G-3
FV = p X FV of 1 factor
= $9,600 X 1.60103
= $15,369.89
LO 1 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only) G-1
,BRIEF EXERCISE G-4
FV of an annuity of 1 = p X FV of an annuity factor
= $78,000 X 13.18079
= $1,028,101.62
LO 1 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE G-5
FV = (p X FV of 1 factor) + (p X FV of an annuity factor)
= ($8,000 X 2.40662) + ($1,000 X 28.13238)
= $19,252.96 + $28,132.38
= $47,385.34
[(p X FV of 1 factor) + (p X FV of an annuity factor) = FV]
[($8,000 X 2.40662) + ($1,000 X 28.13238) = $47,385.34
LO 1 BT: AP Difficulty: Medium TOT: 6 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE G-6
FV = p X FV of 1 factor
= $35,000 X 1.46933
= $51,426.55
LO 1 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE G-7
(a) (b)
(1) 12% 7 periods
4% 22 periods
5% 16 periods
(2) 10% 20 periods
10% 7 periods
3% 10 periods
G-2 Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only)
,LO 2 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Reporting
BRIEF EXERCISE G-8
(a) i = 10%
? $25,000
0 1 2 3 4 5 6 7 8 9
Discount rate from Table 3 is .42410 (9 periods at 10%). Present value
of $25,000 to be received in 9 years discounted at 10% is therefore
$10,602.50 ($25,000 X .42410).
(PV of an amount = Amount X PV of 1 factor)
($10,602.50 = $25,000 X .42410)
(b) i = 9%
? $25,000 $25,000 $25,000 $25,000 $25,000 $25,000
0 1 2 3 4 5 6
Discount rate from Table 4 is 4.48592 (6 periods at 9%). Present value of
6 payments of $25,000 each discounted at 9% is therefore $112,148.00
($25,000 X 4.48592).
(PV of an annuity = Annuity X PV of an annuity factor)
($112,148.00 = $25,000 X 4.48592)
LO 2 BT: AP Difficulty: Easy TOT: 5 min. AACSB: Analytic AICPA FC: Reporting
Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only) G-3
,BRIEF EXERCISE G-9
i = 8%
? $900,000
0 1 2 3 4 5 6
Discount rate from Table 3 is .63017 (6 periods at 8%). Present value of
$900,000 to be received in 6 years discounted at 8% is therefore $567,153
($900,000 X .63017). Messi Company should therefore invest $567,153
to have $900,000 in six years.
(PV of an amount = Amount X PV of 1 factor)
($567,153.00 = $900,000 X .63017)
LO 2 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE G-10
i = 6%
? $450,000
0 1 2 3 4 5 6 7 8
Discount rate from Table 3 is .62741 (8 periods at 6%). Present value of
$450,000 to be received in 8 years discounted at 6% is therefore $282,334.50
($450,000 X .62741). Lloyd Company should invest $282,334.50 to have
$450,000 in eight years.
(PV of an amount = Amount X PV of 1 factor)
($282,334.50 = $450,000 X .62741)
LO 2 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
G-4 Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only)
,BRIEF EXERCISE G-11
i = 8%
? $40,000 $40,000 $40,000 $40,000 $40,000 $40,000
0 1 2 3 4 14 15
Discount rate from Table 4 is 8.55948. Present value of 15 payments of
$40,000 each discounted at 8% is therefore $342,379.20 ($40,000 X 8.55948).
Robben Company should pay $342,379.20 for this annuity contract.
(PV of an annuity = Annuity X PV of an annuity factor)
($342,379.20 = $40,000 X 8.55948)
LO 2 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE G-12
i = 5%
? $80,000 $80,000 $80,000 $80,000 $80,000 $80,000
0 1 2 3 4 5 6
Discount rate from Table 4 is 5.07569. Present value of 6 payments of $80,000
each discounted at 5% is therefore $406,055.20 ($80,000 X 5.07569). Kaehler
Enterprises invested $406,055.20 to earn $80,000 per year for six years.
(PV of an annuity = Annuuity X PV of an annuity factor)
($406,055.20 = $80,000 X 5.07569)
LO 2 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting
Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only) G-5
,BRIEF EXERCISE G-13
i = 10%
? $400,000
Diagram
for
Principal
0 1 2 3 4 9 10
i = 10%
? $44,000 $44,000 $44,000 $44,000 $44,000 $44,000
Diagram
for
Interest
0 1 2 3 4 9 10
Present value of principal to be received at maturity:
$400,000 X 0.38554 (PV of $1 due in 10 periods
at 10% from Table 3) ............................................................ $154,216*
Present value of interest to be received annually
over the term of the bonds: $44,000* X 6.14457
(PV of $1 due each period for 10 periods at 10%
from Table 4) ........................................................................ 270,361**
Present value of bonds ............................................................... $424,577**
*$400,000 X .11
**Rounded.
[PV of bond = (Face value of bond X PV of 1 factor) + (Annual interest X PV of an annuity factor)]
[$424,577 = ($400,000 X 0.38554) + ($44,000 X 6.14457)]
LO 2 BT: AP Difficulty: Medium TOT: 10 min. AACSB: Analytic AICPA FC: Reporting
G-6 Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only)
,BRIEF EXERCISE G-14
The bonds will sell at a discount (for less than $400,000). This may be proven
as follows:
Present value of principal to be received at maturity:
$400,000 X .32197 (PV of $1 due in 10 periods
at 12% from Table 3) ............................................................ $128,788*
Present value of interest to be received annually
over the term of the bonds: $44,000 X 5.65022
(PV of $1 due each period for 10 periods at 12%
from Table 4) ........................................................................ 248,610*
Present value of bonds ............................................................... $377,398*
*Rounded.
[PV of bond = (Face value of bond X PV of 1 factor) + (Annual interest X PV of an annuity factor]
[$377,398 = ($400,000 X .32197) + ($44,000 X 5.65022)]
LO 2 BT: AP Difficulty: Medium TOT: 10 min. AACSB: Analytic AICPA FC: Reporting
Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only) G-7
, BRIEF EXERCISE G-15
i = 6%
? $75,000
Diagram
for
Principal
0 1 2 3 4 5 6
i = 6%
? $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Diagram
for
Interest
0 1 2 3 4 5 6
Present value of principal to be received at maturity:
$75,000 X .70496 (PV of $1 due in 6 periods
at 6% from Table 3) ............................................................. $52,872.00
Present value of interest to be received annually
over the term of the note: $3,000* X 4.91732
(PV of $1 due each period for 6 periods at
6% from Table 4) ................................................................. 14,751.96
Present value of note received .................................................. $67,623.96
*$75,000 X .04
[PV of note = (PV of principal X PV of 1 factor ) + (Annual interest X PV of an annuity factor)]
[$67,623.96 = ($75,000 X .70496) + ($3,000 X 4.91732)]
LO 2 BT: AP Difficulty: Medium TOT: 10 min. AACSB: Analytic AICPA FC: Reporting
G-8 Copyright © 2018 WILEY Kimmel, Accounting, 7/e, Solutions Manual (For Instructor Use Only)
