Test Bank for Accounting Principles, 15th Edition by Jerry J. Weygandt, Paul D. Kimmel

Test Bank for Accounting Principles, 15th Edition by Jerry J. Weygandt, Paul D.
Kimmel

Accounting Principles, 15e (Weygandt)
Appendix G Time Value of Money Complete Chapters ✅
1) Interest is the difference between the amount borrowed and the principal.
Answer: FALSE
Diff: 1
LO: 1. Compute interest and future values.
Bloom/IFRS: K
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1

2) Compound interest is computed on the principal and any interest earned that has not been paid
or received.
Answer: TRUE
Diff: 1
LO: 1. Compute interest and future values.
Bloom/IFRS: K
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1

3) The future value of a single amount is the value at a future date of a given amount invested
now, assuming compound interest.
Answer: TRUE
Diff: 1
LO: 1. Compute interest and future values.
Bloom/IFRS: K
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1

4) When the periodic payments are not equal in each period, the future value can be computed
by using a future value of an annuity table.
Answer: FALSE
Diff: 1
LO: 1. Compute interest and future values.
Bloom/IFRS: C
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1




1

,5) The process of determining the present value is referred to as discounting the future amount.
Answer: TRUE
Diff: 1
LO: 2. Compute present values.
Bloom/IFRS: K
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1

6) A higher discount rate produces a higher present value.
Answer: FALSE
Diff: 1
LO: 2. Compute present values.
Bloom/IFRS: K
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1

7) In computing the present value of an annuity, it is not necessary to know the number of
discount periods.
Answer: FALSE
Diff: 1
LO: 2. Compute present values.
Bloom/IFRS: C
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1

8) The present value of a long-term note or bond is a function of two variables.
Answer: FALSE
Diff: 1
LO: 2. Compute present values.
Bloom/IFRS: K
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1

9) The present value of an annuity is the value now of a series of future receipts or payments,
discounted assuming compound interest.
Answer: TRUE
Diff: 1
LO: 2. Compute present values.
Bloom/IFRS: K
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1


2

,10) The decision to make long-term capital investments is best evaluated without recognizing the
time value of money.
Answer: FALSE
Diff: 1
LO: 3. Compute the present value in capital budgeting situations.
Bloom/IFRS: K
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1

11) In a capital budgeting decision, a positive net present value means the decision to invest
should be accepted.
Answer: TRUE
Diff: 1
LO: 3. Compute the present value in capital budgeting situations.
Bloom/IFRS: K
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1

12) With a financial calculator, one can solve for any interest rate or for any number of periods
in a time value of money problem.
Answer: TRUE
Diff: 1
LO: 4. Use a financial calculator to solve time value of money problems.
Bloom/IFRS: K
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1

13) Compound interest is the return on principal
A) only.
B) for one or more periods.
C) plus interest for two or more periods.
D) for one period.
Answer: C
Diff: 1
LO: 1. Compute interest and future values.
Bloom/IFRS: K
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1




3

, 14) The factor 1.08160 is taken from the 4% column and 2 periods row in a certain table. From
what table is this factor taken?
A) Future value of 1
B) Future value of an annuity of 1
C) Present value of 1
D) Present value of an annuity of 1
Answer: A
Diff: 2
LO: 1. Compute interest and future values.
Bloom/IFRS: C
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None
Min.: 1

15) If $40,000 is deposited in a savings account paying interest of 4% compounded annually,
what amount will be in the account at the end of 5 years?
A) $32,878
B) $48,000
C) $48,620
D) $48,666
Answer: D
Explanation: $40,000 × 1.21665 = $48,666
Present value × FVIF (n = 5 periods, i = 4%) = Future value
Diff: 2
LO: 1. Compute interest and future values.
Bloom/IFRS: AP
AACSB/IMA: Analytic/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None
Min.: 2

16) The future value of 1 factor will always be
A) equal to 1.
B) greater than 1.
C) less than 1.
D) equal to the interest rate.
Answer: B
Diff: 1
LO: 1. Compute interest and future values.
Bloom/IFRS: K
AACSB/IMA: None/Investment Decisions
AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management
Min.: 1




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