Test Bank for Financial and Managerial Accounting 5th Edition by Jerry J. Weygandt, Paul D. Kimmel & Jill E. Mitchell| A+ Grades

Test Bank for Financial and Managerial Accounting, 5th Edition by Jerry J.
Weygandt, Paul D. Kimmel

Financial and Managerial Accounting, 5e (Weygandt) All Chapters ✅
Appendix G Time Value of Money

1) Interest is the difference between the amount borrowed and the principal.
Answer: FALSE
Diff: 1
LO: 1
Bloom / IFRS: K
AACSB/ IMA: Reflective Thinking / Investment Decision
AICPA: BB: Resource Management; FC: Measurement; PC: Project Management
Minutes: 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
Bloom / IFRS: K
AACSB/ IMA: Reflective Thinking / Investment Decision
AICPA: BB: Resource Management; FC: Measurement; PC: Project Management
Minutes: 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
Bloom / IFRS: K
AACSB/ IMA: Reflective Thinking / Investment Decision
AICPA: BB: Resource Management; FC: Measurement; PC: Project Management
Minutes: 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
Bloom / IFRS: C
AACSB/ IMA: Reflective Thinking / Investment Decision
AICPA: BB: Resource Management; FC: Measurement; PC: Project Management
Minutes: 1




1

,5) The process of determining the present value is referred to as discounting the future amount.
Answer: TRUE
Diff: 1
LO: 2
Bloom / IFRS: K
AACSB/ IMA: Reflective Thinking / Investment Decision
AICPA: BB: Resource Management; FC: Measurement; PC: Project Management
Minutes: 1

6) A higher discount rate produces a higher present value.
Answer: FALSE
Diff: 1
LO: 2
Bloom / IFRS: K
AACSB/ IMA: Reflective Thinking / Investment Decision
AICPA: BB: Resource Management; FC: Measurement; PC: Project Management
Minutes: 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
Bloom / IFRS: C
AACSB/ IMA: Reflective Thinking / Investment Decision
AICPA: BB: Resource Management; FC: Measurement; PC: Project Management
Minutes: 1

8) The present value of a long-term note or bond is a function of two variables.
Answer: FALSE
Diff: 1
LO: 2
Bloom / IFRS: K
AACSB/ IMA: Reflective Thinking / Investment Decision
AICPA: BB: Resource Management; FC: Measurement; PC: Project Management
Minutes: 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
Bloom / IFRS: K
AACSB/ IMA: Reflective Thinking / Decision Analysis
AICPA: BB: Resource Management; FC: Measurement; PC: Project Management
Minutes: 1


2

,10) 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
Bloom / IFRS: K
AACSB/ IMA: Reflective Thinking / Decision Analysis
AICPA: BB: Resource Management; FC: Measurement; PC: Project Management
Minutes: 1

11) 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
Bloom / IFRS: K
AACSB/ IMA: Reflective Thinking / Investment Decision
AICPA: BB: Resource Management; FC: Measurement; PC: Project Management
Minutes: 1

12) The factor 1.0609 is taken from the 3% 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
Bloom / IFRS: C
AACSB/ IMA: Analytic / Investment Decisions
AICPA: BB: Resource Management; FC: Measurement; PC: Problem Solving/Decision
Making
Minutes: 1




3

, 13) If $40,000 is put in a savings account paying interest of 4% compounded annually, what
amount will be in the account at the end of five years?
A) $32,878
B) $48,000
C) $48,620
D) $48,666
Answer: D
Explanation: 1.21665 × $40,000 = $48,666
(FVIF n= 5, i = 4% × PV) = FV
Diff: 2
LO: 1
Bloom / IFRS: AP
AACSB/ IMA: Analytic / Quantitative Methods
AICPA: BB: Resource Management; FC: Measurement; PC: Problem Solving/Decision
Making
Minutes: 2

14) 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
Bloom / IFRS: K
AACSB/ IMA: Reflective Thinking / Investment Decision
AICPA: BB: Resource Management; FC: Measurement; PC: Project Management
Minutes: 1

15) All of the following are necessary to compute the future value of a single amount except the
A) interest rate.
B) number of periods.
C) principal.
D) maturity value.
Answer: D
Diff: 1
LO: 1
Bloom / IFRS: K
AACSB/ IMA: Reflective Thinking / Investment Decision
AICPA: BB: Resource Management; FC: Measurement; PC: Project Management
Minutes: 1




4