Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 5.3DMP
To determine
Present value:
Present value refers to the present worth of the money that is received in future in a lump sum or as series of
Annuity:
An annuity is referred as a sequence of payment of fixed amount of cash flows that occurs over the equal intervals of time.
To calculate: The present value of two methods
To determine
To write: A short letter to Person P describing the method used to compare the two contracts.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Problem 13NOREEN INC, a truck dealer, sells a truck on January 1, 2019, to MENDOZA INC for P3,000,000. NOREEN agrees to repurchase the truck on December 31, 2020 for P3,630,000
Using the information above, what is the interest expense for 2019?2.A. None C. 330,000 B. 300,000 D. 630,000
Problem 5-20 Annuities (LO3)
A famous quarterback just signed a $11.2 million contract providing $2.8 million a year for 4 years. A less famous receiver signed a $9.4 million 4-year contract providing $3 million now and $2.3 million a year for 4 years. The interest rate is 8%.
a. What is the PV of the quarterback's contract? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
b. What is the PV of the receiver's contract? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
QUESTION 12
George provides you with the following information in respect of the 2022 income year:
$
• gross salary and wages
• a compensation payment from an insurance company for the loss of one finger
28,000
• interest accrued at 30 June 2022 in respect of a 6-month term deposit invested on 5 January 2022
but not paid to George until 5 July 2022
900
• Navy Reserve pay (for part-time service eight weekends per year)
1,600
71,000
What is George's assessable income for the 2022 income year?
$71,000
$71,900
$72,600
O $73,500
Chapter 5 Solutions
Intermediate Accounting, 10 Ed
Ch. 5 - Prob. 5.1QCh. 5 - Explain compound interest.Ch. 5 - Prob. 5.3QCh. 5 - Prob. 5.4QCh. 5 - Prob. 5.5QCh. 5 - Prob. 5.6QCh. 5 - What is an annuity?Ch. 5 - Explain the difference between an ordinary annuity...Ch. 5 - Prob. 5.9QCh. 5 - Prepare a time diagram for the present value of a...
Ch. 5 - Prepare a time diagram for the present value of a...Ch. 5 - What is a deferred annuity?Ch. 5 - Assume that you borrowed 500 from a friend and...Ch. 5 - Compute the required annual payment in Question...Ch. 5 - Explain how the time value of money concept is...Ch. 5 - Prob. 5.1BECh. 5 - Prob. 5.2BECh. 5 - Prob. 5.3BECh. 5 - Present value; single amount LO63 John has an...Ch. 5 - Present value; solving for unknown; single amount ...Ch. 5 - Future value; ordinary annuity LO66 Leslie...Ch. 5 - Future value; annuity due LO66 Refer to the...Ch. 5 - Prob. 5.8BECh. 5 - Prob. 5.9BECh. 5 - Prob. 5.10BECh. 5 - Solve for unknown; annuity LO68 Kingsley Toyota...Ch. 5 - Price of a bond LO69 On December 31, 2018,...Ch. 5 - Lease payment LO69 On September 30, 2018,...Ch. 5 - Prob. 5.1ECh. 5 - Future value; single amounts LO62 Determine the...Ch. 5 - Prob. 5.3ECh. 5 - Prob. 5.5ECh. 5 - Prob. 5.6ECh. 5 - Prob. 5.7ECh. 5 - Prob. 5.10ECh. 5 - Deferred annuities LO67 Required: Calculate the...Ch. 5 - Solving for unknowns; annuities LO68 For each of...Ch. 5 - Solving for unknown annuity amount LO68 Required:...Ch. 5 - Prob. 5.15ECh. 5 - Price of a bond LO69 On September 30, 2018, the...Ch. 5 - Price of a bond; interest expense LO69 On June...Ch. 5 - Prob. 5.18ECh. 5 - Prob. 5.19ECh. 5 - Lease payments LO69 On June 30, 2018,...Ch. 5 - Lease payments; solve for unknown interest rate ...Ch. 5 - Analysis of alternatives LO63, LO67 Esquire...Ch. 5 - Analysis of alternatives LO63, LO67 Harding...Ch. 5 - Investment analysis LO63, LO67 John Wiggins is...Ch. 5 - Prob. 5.5PCh. 5 - Prob. 5.6PCh. 5 - Deferred annuities LO67 On January 1, 2018, the...Ch. 5 - Prob. 5.8PCh. 5 - Noninterest-bearing note; annuity and lump-sum...Ch. 5 - Prob. 5.10PCh. 5 - Solving for unknown lease payment LO68, LO69...Ch. 5 - Solving for unknown lease payment; compounding...Ch. 5 - Lease v s. buy alternatives LO63, LO67, LO69...Ch. 5 - Prob. 5.14PCh. 5 - Prob. 5.15PCh. 5 - Prob. 5.1DMPCh. 5 - Prob. 5.2DMPCh. 5 - Prob. 5.3DMPCh. 5 - Prob. 5.4DMPCh. 5 - Judgment Case 65 Replacement decision LO63, LO67...Ch. 5 - Prob. 5.6DMPCh. 5 - Prob. 5.7DMP
Knowledge Booster
Similar questions
- Exercise 12A-2 Basic Present Value Concepts [LO12-7] Julie has just retired. Her company's retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $142,000 immediately as her full retirement benefit. Under the second option, she would receive $21,000 each year for 5 years plus a lump-sum payment of $61,000 at the end of the 5-year period. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1-a. Calculate the present value for the following assuming that the money can be invested at 14%. 1-b. If she can invest money at 14%, which option would you recommend that she accept? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Calculate the present value for the following assumir that the money can be invested at 14%. (Round your final answers to the nearest whole dollar amount.) Option 1 Option 2 Present…arrow_forwardLO6-4,LO6-5 E 6-5 Performance obligations LO6–2, On March 1, 2024, Gold Examiner receives $147,000 from a local bank and promises to deliver 100 units of certified l-oz. gold bars on a future date. The contract states that ownership passes to the bank when Gold Examiner delivers the products to Brink's, a third-party carrier. In addition, Gold Examiner has agreed to provide a replacement shipment at no additional cost if the product is lost in transit. The stand-alone price of a gold bar is $1,440 per unit, and Gold Examiner estimates the stand-alone price of the replacement insurance service to be $60 per unit. Brink's picked up the gold bars from Gold Examiner on March 30, and delivery to the bank occurred on April 1. Required: 1. How many performance obligations are in this contract? 2. Prepare the journal entry Gold Examiner would record on March 1. 3. Prepare the journal entry Gold Examiner would record on March 30. 4. Prepare the journal entry Gold Examiner would record on April…arrow_forwardProblem 13NOREEN INC, a truck dealer, sells a truck on January 1, 2019, to MENDOZA INC for P3,000,000. NOREEN agrees to repurchase the truck on December 31, 2020 for P3,630,000. How much should NOREEN INC record interest and retirement of its liability to MENDOZAINC on December 31, 2020?None C. 330,000; 3,630,000 300,000; 3,600,000 D. 630,000; 3,630,000arrow_forward
- 4-6A • LO 3 See Example 4-11 on page 4-22 Damerly Company (a Utah employer) wants to give a holiday bonus check of $250 to each employee. Since it wants the check amount to be $250, it will need to gross-up the amount of the bonus. Calculate the withholding taxes and the gross amount of the bonus to be made to John Rolen if his cumulative earnings for the year are $46,910. Besides being subject to social security taxes and federal income tax (supplemental rate), a 4.95% Utah income tax must be withheld on supplemental payments...arrow_forward4G 10:12 O O E 01:58:20 Remaining Multiple Choice A rank and file employee received the following benefits: Cash as loyalty award for 10 years of service P15,000 Collective bargaining agreement and productivity incentive P9,000 Free lunch meals for the year P10,000 Christmas and anniversary gift P25,000 Medical cash assistance P15,000 Determine the taxable amount of de minimis as "other benefits" P35,000 P50,000 P59,000 P69,000 15 of 60arrow_forwardProblem 9-8 Calculating the Amount of Disability Benefits [LO7] Kennedi Stapleton, a widow, has take-home pay of $5,400 a month. Her disability insurance coverage replaces 70 percent of her earnings after a 90-day (3-month) waiting period. a. What amount would she receive in disability benefits if an illness kept Kennedi off work for 270 days (9 months)? (Omit the "$" sign in your response.) Disability benefits b. What if her disability started when she was age 20 and was severe enough that it lasted until she was 50 years old? (Omit the "$" sign in your response.) Disability benefitsarrow_forward
- LO 5 eBook 100 Hint C Print References On January 1, 2024, Nath-Langstrom Services, Incorporated, a computer software training firm, leased several computers under a two- year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual Interest rate of 4%. • The contract calls for four rent payments of $12,500 each, payable semiannually on June 30 and December 31 each year. • The computers were acquired by ComputerWorld at a cost of $95,000 and were expected to have a useful life of five years with no residual value. . Both firms record amortization and depreciation semiannually. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Prepare appropriate Journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2. Prepare appropriate Journal entries recorded by ComputerWorld Leasing for the first year of the lease. Complete…arrow_forwardBook ant 0 ances Problem 5-10 Calculating Present Values [LO2] Imprudential, Incorporated, has an unfunded pension liability of $570 million that must be paid in 20 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 6.3 percent, what is the present value of this liability? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g.. 1,234,567.89) Present valuearrow_forward4G 46 10:13 O O 3 N vo, 0.00 a 01:56:59 Remaining Multiple Choice Y leases a building to a client. During the year, he received the following remittance from the lessee: • Rental, net of 10% creditable withholding tax -P1,800,000 • Real property tax of the leased building-P60,000 • Reimbursement for utilities used by the lessee paid by Y-P150,000 Compute for the gross income subject to regular tax. P1,860,000 P1,950,000 P2,010,000 P2,060,000 43 of 60arrow_forward
- 4G 46 10:14 O O O A 0.00 01:55:58 Remaining Multiple Choice On October 1, 2021, C company purchased a P1,800,000 car and designated it for the use of its non-resident alien executive. Compute the fringe benefit tax. P15,000 P24,231 P30,000 P45,000 59 of 60arrow_forward4G H 10:13 O O l 01:57:06 Remaining Multiple Choice T purchased a life annuity for P1,500,000 which will pay him P150,000 a year. What will T include in his gross income on the 11th year of the policy? P150,000 P1,350,000 P1,500,000 ZERO 39 of 60arrow_forwardExercise 10-3A (Algo) Determining the present value of a lump-sum future cash receipt LO 10-1 Gail Trevino expects to receive a $630,000 cash benefit when she retires seven years from today. Ms. Trevino’s employer has offered an early retirement incentive by agreeing to pay her $368,000 today if she agrees to retire immediately. Ms. Trevino desires to earn a rate of return of 10 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Calculate the present value of the $630,000 future cash benefit. Assuming that the retirement benefit is the only consideration in making the retirement decision, should Ms. Trevino accept her employer’s offer? (Round your final answer to the nearest whole dollar value.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Fundamentals Of Financial Management, Concise Edi...FinanceISBN:9781337902571Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...FinanceISBN:9781305635937Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...FinanceISBN:9781285065137Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals Of Financial Management, Concise Edi...
Finance
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781285065137
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning