The investment in the notes receivable earns interest at a rate of 12% per year.

Brief Exercise 6-1

1. Chris Spear invested $12,720 today in a fund that earns 6% compounded annually. (Use the tables below.)

To what amount will the investment grow in 3 years? To what amount would the investment grow in 3 years if the fund earns 6% annual interest compounded semiannually? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

Investment at 6% annual interest

$15150

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Investment at 6% annual interest, compounded semiannually

$15188

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Brief Exercise 6-2

Tony Bautista needs $21,080 in 2 years. (Use the tables below.)

What amount must he invest today if his investment earns 12% compounded annually? What amount must he invest if his investment earns 12% annual interest compounded quarterly? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

Investment at 12% annual interest

$16805

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Investment at 12% annual interest, compounded quarterly

$16641

3 Candice Willis will invest $11,609 today. She needs $190,000 in 20 years. (Use the tables below.)

What annual interest rate must she earn? (Round answer to 0 decimal places, e.g. 7%.)

Interest rate

=

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15%

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Brief Exercise 6-7

John Fillmore’s lifelong dream is to own his own fishing boat to use in his retirement. John has recently come into an inheritance of $434,800. He estimates that the boat he wants will cost $333,900 when he retires in 7 years. (Use the tables below.)

How much of his inheritance must he invest at an annual rate of 11% (compounded annually) to buy the boat at retirement? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

Investment amount

$160826

Exercise 6-2 (Part Level Submission)

Alan Jackson invests $47,000 at 10% annual interest, leaving the money invested without withdrawing any of the interest for 10 years. At the end of the 10 years, Alan withdraws the accumulated amount of money.

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(a) Compute the amount Alan would withdraw assuming the investment earns simple interest. (Round answers to 0 decimal places, e.g. 458,581.)

Total withdrawn

$94000

Compute the amount Alan would withdraw assuming the investment earns interest compounded annually. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Total withdrawn

$121906

Compute the amount Alan would withdraw assuming the investment earns interest compounded semiannually. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Total withdrawn

$124705

LEW Company purchased a machine at a price of $109,000 by signing a note payable, which requires a single payment of $141,158 in 3 years. (Use the table below.)Assuming annual compounding of interest, what rate of interest is being paid on the loan?

Rate of interest

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9%

Exercise 6-10 (Part Level Submission)

Consider the following independent situations. (Use the tables below.)

(a)

Mike Finley wishes to become a millionaire. His money market fund has a balance of $299,246 and has a guaranteed interest rate of 9%. How many years must Mike leave that balance in the fund in order to get his desired $1,000,000?

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14 years

(b)

Assume that Sally Williams desires to accumulate $1 million in 17 years using her money market fund balance of $371,365. At what interest rate must Sally’s investment compound annually? (Round answer to 0 decimal places, e.g. 5%.)

Interest rate

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 %

Multiple Choice Question 75

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Correct.

Dunston Company will receive $300,000 in a future year. If the future receipt is discounted at an interest rate of 10%, its present value is $153,948. In how many years is the $300,000 received?

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7 years

IFRS Multiple Choice Question 01

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Correct.

Underwood Company maintains its accounting records using IFRS. The company recently signed a lease for a new office building, for a lease period of 10 years. Under the lease agreement, a security deposit of $25,000 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 10% per year. What amount will the company receive at the time the lease expires?

$64,844.

IFRS Multiple Choice Question 04

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Correct.

Barton Company, a company who maintains its accounting records using IFRS, manufactures furniture. Barton sells a $90,000 order to Save-A Lot Furniture in exchange for a zero-interest-bearing note due from the customer in two years. Since there is no stated interest rate on the note, the controller uses the current market rate of 8% to derive the present value factor. Based on this information and the incorporation of the time value of money, which of the following would be recorded by Barton to recognize this sale?

A credit to Discount on Notes Receivable for $12,839.

IFRS Multiple Choice Question 07

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Correct.

Jamison Company uses IFRS for its financial reporting. It produces machines that sell globally. All sales are accompanied by a one-year warranty. At the end of the year, the company has the following data: • 3,000 units were sold during the year. • The trend over the past five years has been that 4% of the machines were defective in some way and had to be repaired. Of this 4%, half required a full replacement at a cost of $3,000 per unit and half were able to be repaired at an average cost of $300. What is the expected value of the warranty cost provision?

$198,000

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