INTERMEDIATE ACCOUNTING CHAPTER 21
EXAM PREP QUESTIONS AND ANSWERS FULLY
VERIFIED
◉ Level 1 fair value measures are.
Answer: the least subjective because they are based on quoted
prices
◉ Level 3 fair value measures are.
Answer: the most subjective because they are based on
unobservable inputs, such as a company's own data or assumptions
related to the expected future cash flows associated with the asset or
liability.
◉ interest.
Answer: payment made for the use of borrowed money
◉ simple interest.
Answer: interest paid only on the principal
◉ compound interest.
,Answer: interest earned on both the principal amount and any
interest already earned
◉ To convert the "annual interest rate" into the "compounding
period interest rate.
Answer: divide the annual rate by the number of compounding
periods per year.
◉ determine the number of periods by.
Answer: multiplying the number of years involved by the number of
compounding periods per year
◉ The present value is always a _______ amount than the known
future value, due to earned and accumulated interest..
Answer: smaller
◉ Use _____ to determine future value.
Answer: accumulation
◉ Use _____ to determine present value.
Answer: discounting
◉ to find the present value of an annuity due factor.
, Answer: multiply the present value of an ordinary annuity factor by
1 plus the interest rate (that is, 1 + i).
◉ If an annuity due and an ordinary annuity have the same number
of equal payments and the same interest rates, what is true
regarding the present values of each?.
Answer: The present value of the annuity due is greater than the
present value of the ordinary annuity because payments are made
sooner with an annuity due (at the beginning of the period) than
with an ordinary annuity (at the end of the period).
◉ ordinary annuity payments made at.
Answer: the end of a period
◉ annuity due payments made at.
Answer: the beginning of a period
◉ For which accounting topic are present value-based accounting
measurements relevant?.
Answer: Environmental Liabilities
◉ Which four variables are fundamental to all compound interest
problems?.
EXAM PREP QUESTIONS AND ANSWERS FULLY
VERIFIED
◉ Level 1 fair value measures are.
Answer: the least subjective because they are based on quoted
prices
◉ Level 3 fair value measures are.
Answer: the most subjective because they are based on
unobservable inputs, such as a company's own data or assumptions
related to the expected future cash flows associated with the asset or
liability.
◉ interest.
Answer: payment made for the use of borrowed money
◉ simple interest.
Answer: interest paid only on the principal
◉ compound interest.
,Answer: interest earned on both the principal amount and any
interest already earned
◉ To convert the "annual interest rate" into the "compounding
period interest rate.
Answer: divide the annual rate by the number of compounding
periods per year.
◉ determine the number of periods by.
Answer: multiplying the number of years involved by the number of
compounding periods per year
◉ The present value is always a _______ amount than the known
future value, due to earned and accumulated interest..
Answer: smaller
◉ Use _____ to determine future value.
Answer: accumulation
◉ Use _____ to determine present value.
Answer: discounting
◉ to find the present value of an annuity due factor.
, Answer: multiply the present value of an ordinary annuity factor by
1 plus the interest rate (that is, 1 + i).
◉ If an annuity due and an ordinary annuity have the same number
of equal payments and the same interest rates, what is true
regarding the present values of each?.
Answer: The present value of the annuity due is greater than the
present value of the ordinary annuity because payments are made
sooner with an annuity due (at the beginning of the period) than
with an ordinary annuity (at the end of the period).
◉ ordinary annuity payments made at.
Answer: the end of a period
◉ annuity due payments made at.
Answer: the beginning of a period
◉ For which accounting topic are present value-based accounting
measurements relevant?.
Answer: Environmental Liabilities
◉ Which four variables are fundamental to all compound interest
problems?.
