D103 - Intermediate Accounting - OA2 (Units
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,A company issues a five-year zero-interest-bearing note for a new lathe it purchased for $25,000. The
market rate of interest at the time the note was issued is 4%. Assuming an annual interest rate of 4% for
five years is appropriate, the present value of the principal is $25,000 × 0.82193 =
$20,548. Assuming an annual interest rate of 5% for 4 years is appropriate, the present value of the
principal is $25,000 × 0.82270 =
$20,568.
What amount should be recorded for the cost of the lathe? - correct ans:The lathe is recorded at its
present value of $20,548. No calculation is required.
Accounting Rule: An asset acquired in exchange for a noninterest-bearing note is valued at the present
value of the note.
Equipment is exchanged for a noninterest-bearing note. Payment of $20,000 on the note is to be made
in one year. The market rate for notes of similar risk is 5%. Assuming an annual interest rate of 5% is
appropriate, the present value of the principal is $20,000 × 0.95238 = $19,048. Assuming that a
semiannual interest rate of 2.5% is appropriate, the present value of the principal is ($20,000/2) ×
1.92742 = $19,274.
What amount should be recorded for the purchase of this equipment? - correct ans:The equipment is
recorded at its present value of $19,048. No calculation is required.
Accounting Rule: An asset acquired in exchange for a noninterest-bearing note is valued at the present
value of the note.
Company A sells land to Company B for $100,000. Company A takes a note from Company B that is due
in two years. Assuming an annual interest rate of 5% is appropriate, the implied annual interest is
$100,000
× 0.05 = $5,000, and the present value of the note is $100,000 × 0.90703
= $90,703.
What amount should Company A record for the sale? - correct ans:The note is recorded at its present
value of $90,703. No calculation is required.
,Accounting Rule: A note received in exchange for property is valued at its present value.
Company A sells a parcel of land to Company B in exchange for a note receivable. The terms of the note
require Company B to make a single payment of $600,000 in two years. Using a 10% interest rate, the
implied annual interest is $600,000 × 0.10 = $60,000, and the present value of the note is $600,000 ×
0.82645 = $495,870.
What amount must Company A consider as proceeds from the sale of the land in order to calculate gross
profit or gain/loss on the sale, and be in accordance with generally accepted accounting principles
(GAAP)? - correct ans:The note is recorded at its present value of $495,870. No calculation is required.
Accounting Rule: A note received in exchange for property is valued at its present value.
A company performs services for a customer in exchange for a noninterest-bearing note. The customer
agrees to make a payment of$100,000 in three years. Using a 5% interest rate, the implied annual
interest is $100,000 × 0.05 = $5,000, and the present value of the note is $100,000 × 0.86384 = $86,384.
What amount should the company record as service revenue from this transaction to be in accordance
with generally accepted accounting principles (GAAP)? - correct ans:The note is recorded at its present
value of $86,384. No calculation is required.
Accounting Rule: A note received in exchange for service is valued at its present value.
A customer signs a noninterest-bearing note, promising to pay the company
$11,664 in two years. The payment amount is based on an annual interest rate of 8%, which the
company believes is appropriate, resulting in the present value of the note of $11,664 × 0.85734 =
$10,000.
Which amount should the company record as sales revenue from this transaction to be in accordance
with generally accepted accounting principles (GAAP)? - correct ans:The note is recorded at its present
value of $10,000. No calculation is required.
, Accounting Rule: A note received in exchange for goods is valued at its present value.
A company requires $8,000 cash in a savings account earning 2% interest at the end of the year.
Assuming an annual interest rate of 2% is appropriate, the implied annual interest is $8,000 × 0.02 =
$160, and the present value of the savings is $8,000 × 0.98039 = $7,843.
What amount should be deposited into the savings account at the beginning of the year? - correct
ans:The present value of $8,000 at the beginning of the year is $7,843. No calculation is required.
This is a single-sum problem that requires determining the unknown present value of a known single
sum of money in the future that is discounted for a certain number of periods at a certain interest rate.
Accounting Rule: Present value is the amount that must be invested now to produce a known future
value. It is always a smaller amount than the given future value.
A company collects $1,500 of rent from a tenant at the end of the year. The company invests the rent
money in an investment earning 4% interest per year. Assuming a 4% annual interest rate is appropriate,
the implied annual interest is $1,500 × 0.04 = $60, and the present value of the rent is $1,500 × 0.96154
= $1,442.
What is the discounted value of this rent at the beginning of Year 1? - correct ans:Discounting is the
process of reducing the face/principal amount to a present value. The present value of $1,500 at the
beginning of the year is $1,442. No calculation is required.
This is a single-sum problem that requires determining the unknown present value of a known single
sum of money in the future that is discounted for a certain number of periods at a certain interest rate.
Accounting Rule: Present value is the amount that must be invested now to produce a known future
value. It is always a smaller amount than the given future value.
A company has the following cash balances:
Large bank: $ 127,000
Small bank: $ 17,000
5-7) Latest recent and frequently tested
exam with comprehensive questions and
verified accurate solution (detailed &
elaborated) GRADED A+
Professional Academic Assistance Services
Services Offered
Proctored Exam Assistance
Online Class Management (Full Course Support)
Exam Preparation & Study Materials
Assignments and Coursework Support
Essays and Research Papers
Discussion Posts and Replies
CONTACT INFORMATION
WHATAPPSLINK- https://wa.me/254784769540
,A company issues a five-year zero-interest-bearing note for a new lathe it purchased for $25,000. The
market rate of interest at the time the note was issued is 4%. Assuming an annual interest rate of 4% for
five years is appropriate, the present value of the principal is $25,000 × 0.82193 =
$20,548. Assuming an annual interest rate of 5% for 4 years is appropriate, the present value of the
principal is $25,000 × 0.82270 =
$20,568.
What amount should be recorded for the cost of the lathe? - correct ans:The lathe is recorded at its
present value of $20,548. No calculation is required.
Accounting Rule: An asset acquired in exchange for a noninterest-bearing note is valued at the present
value of the note.
Equipment is exchanged for a noninterest-bearing note. Payment of $20,000 on the note is to be made
in one year. The market rate for notes of similar risk is 5%. Assuming an annual interest rate of 5% is
appropriate, the present value of the principal is $20,000 × 0.95238 = $19,048. Assuming that a
semiannual interest rate of 2.5% is appropriate, the present value of the principal is ($20,000/2) ×
1.92742 = $19,274.
What amount should be recorded for the purchase of this equipment? - correct ans:The equipment is
recorded at its present value of $19,048. No calculation is required.
Accounting Rule: An asset acquired in exchange for a noninterest-bearing note is valued at the present
value of the note.
Company A sells land to Company B for $100,000. Company A takes a note from Company B that is due
in two years. Assuming an annual interest rate of 5% is appropriate, the implied annual interest is
$100,000
× 0.05 = $5,000, and the present value of the note is $100,000 × 0.90703
= $90,703.
What amount should Company A record for the sale? - correct ans:The note is recorded at its present
value of $90,703. No calculation is required.
,Accounting Rule: A note received in exchange for property is valued at its present value.
Company A sells a parcel of land to Company B in exchange for a note receivable. The terms of the note
require Company B to make a single payment of $600,000 in two years. Using a 10% interest rate, the
implied annual interest is $600,000 × 0.10 = $60,000, and the present value of the note is $600,000 ×
0.82645 = $495,870.
What amount must Company A consider as proceeds from the sale of the land in order to calculate gross
profit or gain/loss on the sale, and be in accordance with generally accepted accounting principles
(GAAP)? - correct ans:The note is recorded at its present value of $495,870. No calculation is required.
Accounting Rule: A note received in exchange for property is valued at its present value.
A company performs services for a customer in exchange for a noninterest-bearing note. The customer
agrees to make a payment of$100,000 in three years. Using a 5% interest rate, the implied annual
interest is $100,000 × 0.05 = $5,000, and the present value of the note is $100,000 × 0.86384 = $86,384.
What amount should the company record as service revenue from this transaction to be in accordance
with generally accepted accounting principles (GAAP)? - correct ans:The note is recorded at its present
value of $86,384. No calculation is required.
Accounting Rule: A note received in exchange for service is valued at its present value.
A customer signs a noninterest-bearing note, promising to pay the company
$11,664 in two years. The payment amount is based on an annual interest rate of 8%, which the
company believes is appropriate, resulting in the present value of the note of $11,664 × 0.85734 =
$10,000.
Which amount should the company record as sales revenue from this transaction to be in accordance
with generally accepted accounting principles (GAAP)? - correct ans:The note is recorded at its present
value of $10,000. No calculation is required.
, Accounting Rule: A note received in exchange for goods is valued at its present value.
A company requires $8,000 cash in a savings account earning 2% interest at the end of the year.
Assuming an annual interest rate of 2% is appropriate, the implied annual interest is $8,000 × 0.02 =
$160, and the present value of the savings is $8,000 × 0.98039 = $7,843.
What amount should be deposited into the savings account at the beginning of the year? - correct
ans:The present value of $8,000 at the beginning of the year is $7,843. No calculation is required.
This is a single-sum problem that requires determining the unknown present value of a known single
sum of money in the future that is discounted for a certain number of periods at a certain interest rate.
Accounting Rule: Present value is the amount that must be invested now to produce a known future
value. It is always a smaller amount than the given future value.
A company collects $1,500 of rent from a tenant at the end of the year. The company invests the rent
money in an investment earning 4% interest per year. Assuming a 4% annual interest rate is appropriate,
the implied annual interest is $1,500 × 0.04 = $60, and the present value of the rent is $1,500 × 0.96154
= $1,442.
What is the discounted value of this rent at the beginning of Year 1? - correct ans:Discounting is the
process of reducing the face/principal amount to a present value. The present value of $1,500 at the
beginning of the year is $1,442. No calculation is required.
This is a single-sum problem that requires determining the unknown present value of a known single
sum of money in the future that is discounted for a certain number of periods at a certain interest rate.
Accounting Rule: Present value is the amount that must be invested now to produce a known future
value. It is always a smaller amount than the given future value.
A company has the following cash balances:
Large bank: $ 127,000
Small bank: $ 17,000
