ANSWER
KEY OF
PV/FV
QUIZ
1. When the amount earned on a deposit has become part of the principal at the end of a
specified time period the concept is called
Compound interest
2. The future value of $200 received today and deposited at 8 percent for three years is
$252
SOLUTION:
FV
=
200 (1+.08)
3
=
200
(1.259)
=252
3. The present value of $100 to be received 10 years from today, assuming an
opportunity
cost of 9 percent, is
$42
PV
=
100 (1 /1+.09)10
=
100
(1/2.3674)
=100 (.4224)
=42.24
OR
42
4. The present value of a $25,000 perpetuity at a 14 percent discount rate is
$178,571.
25,000/.14 = $178,571
5. Bill plans to fund his individual retirement account (IRA) with the maximum
contribution
of $2,000 at the end of each year for the next 20 years. If Bill can earn 12 percent on his
contributions, how much will he have at the end of the twentieth year?
$19,292
FV ord. Annuity = PV ( 1+r)
= $ 2,000 (1.12) 20
= $2,000 (9.6463)
= $19,292.60 or $19,292
6. Bill plans to fund his individual retirement account (IRA) with the maximum
contribution
of $2,000 at the end of each year for the next 20 years. If Bill can earn 12 percent on his
contributions, how much will he have at the end of the twentieth year?
$12,093
7. $100 is received at the beginning of year 1, $200 is received at the beginning of year 2,
and $300 is received at the beginning of year 3. If these cash flows are deposited at 12
percent, their combined future value at the end of year 3 is ( round off to nearest 4 digit)
$784
FV =100 (1+.12)
1 +200 (1+.12) 2 +300 (1+.12) 3
= 100 (1.12) + 200 (1.2544) + 300 (1.4049)
= 112 +250.88 +421.47
=784.35 OR $784
8. The present value of $1,000 received at the end of year 1, $1,200 received at the end
of
year 2, and $1,300 received at the end of year 3, assuming an opportunity cost of 7
percent, is ( round off to nearest 4 digit)
$3,043
PV = [ (1 ,000) (1÷ (1+0.07)
-1
] + [(1,200) (1÷( 1+0.07)
-2
] +[(1,300) (1÷ (1 +0.10)-3
]
1,000 (0.9346 ) + 1,200 ( .8734) +1,300 (.8163)
= 934.60 +1,048 + 1,061.19
=$3,043.79 OR $ 3,043
9. Tan Cakiong Firm deposits money in a bank that pays a 8% nominal interest rate and
compounds interest semiannually. Compute the Effective interest rate or the true
interest
rate which sometimes is called as annual percentage rate or APR.
8.66%
Effective interest = .08 (1 + .08/06)
= .08 (2.333)
= 18.66%
10. Discount rate is sometimes called as:
REQUIRED RATE OF RETURN
1. The following are the information provided by the accounting department of San Juan
Corporation : Cash P10,000 Accounts Receivable 30,000 Inventory 80,000 Prepaid
Insurance 6,000 Long –Term Assets 200,000 Accounts Payable 30,000 Notes payable
due in 10 months 25,000 Wages Payable 5,000 Long-term liabilities 70,000 SJC
Stockholders (owner’s) Equity 196,000. Based on the information above, The company's
current ratio is
Formula:
Current Ratio: CA/CL
Cash
Accounts Receivable
Inventory
Prepaid Insurance
Total CA
Current Ratio:
Current Ratio:
10,000
30,000
80,000
6,000
126,000
Accounts Payable
Notes Payable
Wages Payable
30,000
25,000
5,000
Total CL
60,000
126,000
60,000
2.1 Or 2.1:1
2. The following are the information provided by the accounting department of San
Juan Corporation : Cash P10,000 Accounts Receivable 30,000 Inventory 80,000
Prepaid Insurance 6,000 Long –Term Assets 200,000 Accounts Payable 30,000 Notes
payable due in 10 months 25,000 Wages Payable 5,000 Long-term liabilities 70,000
SJC Stockholders (owner’s) Equity 196,000. Based on the information above, The
company's quick ratio is
Formula:
Quick Ratio: (CA-Inventory-Expense)/(CL)
Accounts Receivable
30,000
Accounts Payable
30,000
Cash
10,000
Notes Payable
25,000
Wages Payable
5,000
Total
40,000
Total CL
60,000
Quick Ratio:
Quick Ratio:
40,000
60,000
0.67 or 0.7:1
3. For its most recent year a Danger Company had the following information:
Sales on credit of $ 830,000
Cost of Sales of $525,000
Accounts Receivable at the beginning of the year were $80,000 and its Inventory was
$100,000 Accounts Receivable at the end of the year were $86,000 and its Inventory
was $110,000. Based on the data provided, the inventory turnover ratio for the year was
Formula:
Inventory Turnover Ratio: COGS/(Average Inventory/2)
525,000
=
525,000
(100,000+110,000)/2
105,000
Inventory Turnover Ratio:
5.0
4. For its most recent year a Danger Company had the following information:
Sales on credit of $ 830,000
Cost of Sales of $525,000
Accounts Receivable at the beginning of the year were $80,000 and its Inventory was
$100,000
Accounts Receivable at the end of the year were $86,000 and its
Inventory was $110,000
Based on the data provided :
The accounts receivable turnover ratio for the year was
Formula:
Accounts Receivable Turnover Ratio : Net Sales/(Average AR/2)
830,000
=
830,000
(80,000+86,000)/2
83,000
Accounts Receivable Turnover Ratio: 10.0
5. For its most recent year a Danger Company had the following information:
Sales on credit of $ 830,000
Cost of Sales of $525,000
Accounts Receivable at the beginning of the year were $80,000 and its Inventory was
$100,000
Accounts Receivable at the end of the year were $86,000 and its
Inventory was $110,000
Based on the data provided :
On average how many days of sales were in Accounts Receivable during the year?
365
ARTR
= 365
10
= 36.5 OR 37 days
6. For its most recent year a Danger Company had the following information:
Sales on credit of $ 830,000
Cost of Sales of $525,000
Accounts Receivable at the beginning of the year were $80,000 and its Inventory was
$100,000
Accounts Receivable at the end of the year were $86,000 and its
Inventory was $110,000
On average how many days of sales were in Inventory during the year?
365
= 365
ITR
5
= 73 Days
7. Suppose company XYZ paid $1 million in dividends to its preferred shareholders last
year, none of which were special dividends. The company has 5 million shares
outstanding, so the DPS for company XYZ is ?
Formula:
Dividend Per Share: Total Dividend/Shares Outstanding
DPS:
1,000,000
5,000,000
0.20 per share
8. Say your business is in the technology industry, and the average ROA is 14.50%. Your
business, ABC Company, has a net income of $10,000. Your total assets equal $65,000.
Formula:
Return on Assets: Net Income/ Total Assets
ROA:
10,000
65,000
ROA:
0.1538 or 15.38%
9. The last year sales of Kuala Firm was $265 million, including cash sales of $25
million. If its average collection period was 36 days, its ending accounts receivable
balance is closest to
. (Assume a 365-day year.)
Solution:
265,000,000-25,000,000
=
240,000,000
365
365
= 657,534.247 x 36 days
=24,671,232.9 or 23.67M
10. The CAB Reverse International reports net profits of $100,000. This figure includes
interest expense of $12,000 and income taxes of $28,000. When these two expenses are
added back, the EBIT of the company is $140,000. The total assets figure for the
company is $4,000,000.
Return on total assets is _______.
140,00
4,000,000
= 0.035 OR 3.5%
11. The cost of goods sold was $240,000. Beginning and ending merchandising
inventory balances were $20,000 and $30,000, respectively. The merchandise
inventory turnover was:
240,000
(20,000+30,000/2)
=
240,000
25,000
=
9.6 times
12. How do we describe the process of adjusting the value of an asset by recognizing that
it is consumed in a way that does not completely eliminate the resource?
DEPRECIATION
13. Net sales were $360,000. The cost of goods sold was $180,000. Operating expenses
were $120,000. The ending balance of the Accounts Receivable account was $20,000.
The merchandise turnover ratio was 12.75. The profit margin percentage was:
16.67%
14. Gross profit (gross margin) is equal to _____.
REVENUE MINUS THE COST OF GOODS SOLD
15. What is the process of allocating the cost of intangible assets over its estimated life?
AMORTIZATION