SOUTHERN UNIVERSITY and A&M; COLLEGE FALL 2017 ACCT 300 INTERMEDIATE ACCOUNTING
ID: 2573319 • Letter: S
Question
SOUTHERN UNIVERSITY and A&M; COLLEGE FALL 2017 ACCT 300 INTERMEDIATE ACCOUNTING 1 EXAM #3 INSTRUCTIONS i) Answer all questions ii) Use a scantron form for answering questions in section A. ii) You can write on the exam paper. For problem questions, use space provided. SECTION A: MULTIPLE CHOICE QUESTIONS (30 points) 1. Assume Jennifer deposits $30,000 in a high yield bank account that pays depositors interest at a rate of 6% per year, compounded semi-annually. How much will Jennifer have on her account after ten years assuming she does not withdraw any amount before ten years elapse? a. $53,725 b. $40,318 c. $54,183. d. $96,214. 2. Brittany requires $250,000 in five years time to purchase a new home. What amount must she invest today in an investment that earns 2% interest, compounded annually? a. $276,020 b. $203,200. c. $226,433 d. $250,000. 3. Grace and Mike want to begin saving for their child's college education. They estimate that they will need $120,000 in ten years' time. If they are able to earn 3% per year on a savings account, how much should they deposit at the end of each of the next ten years to fund the child's education? a. $14,068. b. $10,468. c. $12,000. d. $12,360 4. What amount should be recorded as the cost of a machine purchased January 1, 2017, which is to be financed by making 10 yearly payments of $5,000 each beginning December 31, 2017? The applicable interest rate is 10%. a. $30,723 b. $50,000 c. $55,000 d. $44,456 5. The market price of a $1,000,000, ten-year, 10% (pays interest semiannually) bond issue sold to yield an effective rate of 12% is a. $885,301. b. $886,996 c. $1,124,622 d. $1,000,000Explanation / Answer
Answer 1-c. $54,183 Fn = P (1 + i)^n Fn = 30,000 X (1 + 3%)^20 Fn = 30,000 X 1.806111 Fn = $54,183.34 or say $54,183 Answer 2-c. $226,433 Fn = P (1 + i)^n $250,000 = P X (1 + 2%)^5 $250,000 = P X 1.104081 P = 250,000 / 1.104081 P = $226,432.70 or say $226,433 (Approx.) Answer 3-b. $10,468 Fn = A X CVFAn,i $120,000 = A X 11.464 (CVFAn=10, i=3%) A = 10,467.55 or say $10,468 (Approx.) Answer 4-a. $30,723 PV = A X PVFAn,i PV = $5,000 X 6.144567 (PVFAn=10,I = 10 ) PV = $30,722.84 or say $30,723 (Approx.)
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