Managerial Accounting Tools For Business And Decision Making 7th Edition by Jerry J. Weygandt -Kimmel - Test Bank

, APPENDIX A
TIME VALUE OF MONEY


SUMMARY OF QUESTIONS BY OBJECTIVES AND BLOOM’S TAXONOMY
Item LO BT Item LO BT Item LO BT Item LO BT Item LO BT
True-False Statements
1. 1 K 3. 1 K 5. 2 K 7. 2 C 9. 3 K
2. 1 K 4. 1 C 6. 2 K 8. 3 K 10. 4 K
Multiple Choice Questions
11. 1 K 17. 1 AP 23. 2 C 29. 2 AP 35. 2 AP
12. 1 C 18. 1 K 24. 2 AP 30. 2 AP 36. 2 AP
13. 1 AP 19. 1 AP 25. 2 AP 31. 2 AP 37. 2 C
14. 1 K 20. 1 K 26. 2 AP 32. 2 C 38. 2 AP
15. 1 K 21. 2 K 27. 2 AP 33. 2 AP 39. 2 AP
16. 1 C 22. 2 C 28. 2 C 34. 2 AP 40. 2 AP
Exercises
41. 1 AP 47. 1 AP 53. 2 AP 59. 2 AP 65. 2 AP
42. 1 AP 48. 1 AP 54. 2 AP 60. 2 AP 66. 2 AP
43. 1 AP 49. 1 AP 55. 2 AP 61. 2 AP
44. 1 AP 50. 1 AP 56. 2 AP 62. 2 AP
45. 1 AP 51. 1 AP 57. 2 AP 63. 2 AN
46. 1 AP 52. 2 AP 58. 2 AP 64. 2 AP
Completion Statements
67. 1 K 68. 1 K 69. 2 K 70. 3 K

,A-2 Test Bank for Managerial Accounting, Seventh Edition

SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE
Item Type Item Type Item Type Item Type Item Type Item Type Item Type
Learning Objective 1
1. TF 11. MC 15. MC 19. MC 43. Ex 47. Ex 51. Ex
2. TF 12. MC 16. MC 20. MC 44. Ex 48. Ex 67. C
3. TF 13. MC 17. MC 41. Ex 45. Ex 49. Ex 68. C
4. TF 14. MC 18. MC 42. Ex 46. Ex 50. Ex
Learning Objective 2
5. TF 24. MC 30. MC 36. MC 53. Ex 59. Ex 65. Ex
6. TF 25. MC 31. MC 37. MC 54. Ex 60. Ex 66. Ex
7. TF 26. MC 32. MC 38. MC 55. Ex 61. Ex 69. C
21. MC 27. MC 33. MC 39. MC 56. Ex 62. Ex
22. MC 28. MC 34. MC 40. MC 57. Ex 63. Ex
23. MC 29. MC 35. MC 52. Ex 58. Ex 64. Ex
Learning Objective 3
8. TF 9. TF 70. C
Learning Objective 4
10. TF


Note: TF = True-False C = Completion
MC = Multiple Choice Ex = Exercise

The chapter also contains one set of five Matching questions.

, Time Value of Money A-3

CHAPTER LEARNING OBJECTIVES

1. Compute interest and future values. Simple interest is computed on the principal only,
while compound interest is computed on the principal and any interest earned that has not
been withdrawn.
To solve for future value of a single amount, prepare a time diagram of the problem. Identify
the principal amount, the number of compounding periods, and the interest rate. Using the
future value of 1 table, multiply the principal amount by the future value factor specified at the
intersection of the number of periods and the interest rate.
To solve for future value of an annuity, prepare a time diagram of the problem. Identify the
amount of the periodic payments (receipts), the number of payments, and the interest rate.
Using the future value of an annuity of 1 table, multiply the amount of the payments by the
future value factor specified at the intersection of the number of periods and the interest rate.
2. Compute present value. The following three variables are fundamental to solving present
value problems: (1) the future amount, (2) the number of periods, and (3) the interest rate (the
discount rate).
To solve for present value of a single amount, prepare a time diagram of the problem. Identify
the future amount, the number of discounting periods, and the discount (interest) rate. Using
the present value of a single amount table, multiply the future amount by the present value
factor specified at the intersection of the number of periods and the discount rate.
To solve for present value of an annuity, prepare a time diagram of the problem. Identify the
amount of future periodic receipts or payment (annuities), the number of discounting periods,
and the discount (interest) rate. Using the present value of an annuity of 1 table, multiply the
amount of the annuity by the present value factor specified at the intersection of the number
of periods and the interest rate.
To compute the present value of notes and bonds, determine the present value of the
principal amount: Multiply the principal amount (a single future amount) by the present value
factor (from the present value of 1 table) intersecting at the number of periods (number of
interest payments) and the discount rate. To determine the present value of the series of
interest payments: Multiply the amount of the interest payment by the present value factor
(from the present value of an annuity of 1 table) intersecting at the number of periods (number
of interest payments) and the discount rate. Add the present value of the principal amount to
the present value of the interest payments to arrive at the present value of the note or bond.

3. Compute the present value in capital budgeting situations. Compute the present values
of all cash inflows and all cash outflows related to the capital budgeting proposal (an
investment-type decision). If the net present value is positive, accept the proposal (make the
investment). If the net present value is negative, reject the proposal (do not make the
investment).
4. Use a financial calculator to solve time value of money problems. Financial calculators
can be used to solve the same and additional problems as those solved with time value of
money tables. Enter into the financial calculator the amounts for all of the known elements of
a time value of money problem (periods, interest rate, payments, future or present value), and
it solves for the unknown element. Particularly useful situations involve interest rates and
compounding periods not presented in the tables.