21.doc-Accounting, 9e, Global Edition (H...
21.doc-Accounting, 9e, Global Edition (Horngren) Chapter
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21.doc-Accounting, 9e, Global Editi...
21.doc-Accounting, 9e, Global Edition (Horngren) Chapter
##### Page 27
9) If \$1,000 is invested in an account with 4% interest compounding yearly, what will the balance of the account be
after 4 years?
Please refer to the following Future Value table:
Future
Value of
\$1
4%
5%
6%
7%
1
1.040
1.050
1.060
1.070
2
1.082
1.103
1.124
1.145
3
1.125
1.158
1.191
1.225
4
1.170
1.216
1.262
1.311
5
1.217
1.276
1.338
1.403
6
1.265
1.340
1.419
1.501
A) \$1,218
B) \$1,170
C) \$1,040
D) \$1,240
Answer:
B
Explanation:
B) Calculations: 1.170 × \$1,000 = \$1,170
Diff: 2
LO:
21-3
EOC Ref:
S21-8
AACSB:
Analytic Skills
AICPA Business:
Critical Thinking
AICPA Functional:
Measurement
10) If \$2,000 is invested in an account with 5% interest compounding yearly, what will the balance of the account be
after 6 years?
Please refer to the following Future Value table:
Future
Value of
\$1
4%
5%
6%
7%
1
1.040
1.050
1.060
1.070
2
1.082
1.103
1.124
1.145
3
1.125
1.158
1.191
1.225
4
1.170
1.216
1.262
1.311
5
1.217
1.276
1.338
1.403
6
1.265
1.340
1.419
1.501
A) \$1,340
B) \$2,680
C) \$2,676
D) \$2,432
Answer:
B
Explanation:
B) Calculations: 1.340 × \$2,000 = \$2,680
Diff: 2
LO:
21-3
EOC Ref:
S21-8
AACSB:
Analytic Skills
AICPA Business:
Critical Thinking
AICPA Functional:
Measurement
27
Copyright © 2012 Pearson Education

##### Page 28
11) If \$5,000 is invested in an account with 7% interest compounding yearly, what will the balance of the account be
after 3 years?
Please refer to the following Future Value table:
Future
Value of
\$1
4%
5%
6%
7%
1
1.040
1.050
1.060
1.070
2
1.082
1.103
1.124
1.145
3
1.125
1.158
1.191
1.225
4
1.170
1.216
1.262
1.311
5
1.217
1.276
1.338
1.403
6
1.265
1.340
1.419
1.50
A) \$6,180
B) \$6,211
C) \$5,867
D) \$6,125
Answer:
D
Explanation:
D) Calculations: 1.225 × \$5,000 = \$6,125
Diff: 2
LO:
21-3
EOC Ref:
S21-8
AACSB:
Analytic Skills
AICPA Business:
Critical Thinking
AICPA Functional:
Measurement
28
Copyright © 2012 Pearson Education

##### Page 29
12) If \$1,000 is invested in an account with 9% interest compounding yearly, approximately how many years will it
take for the amount to double?
Please refer to the following Future Value table:
Future
Value of
\$1
4%
5%
6%
7%
8%
9%
1
1.040
1.050
1.060
1.070
1.080
1.090
2
1.082
1.103
1.124
1.145
1.166
1.188
3
1.125
1.158
1.191
1.225
1.260
1.295
4
1.170
1.216
1.262
1.311
1.360
1.412
5
1.217
1.276
1.338
1.403
1.469
1.539
6
1.265
1.340
1.419
1.501
1.587
1.677
7
1.316
1.407
1.504
1.606
1.714
1.828
8
1.369
1.477
1.594
1.718
1.851
1.993
9
1.423
1.551
1.689
1.838
1.999
2.172
10
1.480
1.629
1.791
1.967
2.159
2.367
A) Slightly more than 8 years
B) Exactly 9 years
C) 5 years
D) Slightly less than 7 years
Answer:
A
Explanation:
A) Calculations: 1.993 only
Diff: 2
LO:
21-3
EOC Ref:
S21-8
AACSB:
Analytic Skills
AICPA Business:
Critical Thinking
AICPA Functional:
Measurement
13) John Doe wins the lottery and may pick from the following three choices:
Take \$750,000 now.
Take \$1,000,000 ten years from now.
Take \$90,000 at the end of this year, and at the end of each following year for ten installments in
total.
Assume that John Doe uses a discount rate of 5% to evaluate his choices.
If he selects the first option, how much is
the present value of that alternative?
A) \$750,000
B) \$1,000,000
C) \$450,000
D) \$798,000
Answer:
A
Diff: 2
LO:
21-3
EOC Ref:
S21-8
AACSB:
Analytic Skills
AICPA Business:
Critical Thinking
AICPA Functional:
Measurement
29
Copyright © 2012 Pearson Education

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