Liberty University ACCT 301 Connect Homework Chapter 5 answers perfection
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Answer each of the following independent questions.
Alex Meir recently won a lottery and has the option of receiving one of the following three prizes: (1)
$74,000 cash immediately, (2) $26,000 cash immediately and a six-period annuity of $8,300
beginning one year from today, or (3) a six-period annuity of $15,000 beginning one year from today.
(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from
the tables provided.)
Assuming that a 11% interest rate properly reflects the time value of money in this situation and that
all maintenance and insurance costs are paid at the end of each year, determine which option Kiddy
should choose. Ignore income tax considerations. (Negative amounts should be indicated by a minus
sign. Round your final answers to nearest whole dollar amount.)
1. Assuming an interest rate of 6%, determine the present value for the above options. Which option
should Alex choose?
1. On June 30, 2021, the Johnstone Company purchased equipment from Genovese Corp. Johnstone
agreed to pay Genovese $25,000 on the purchase date and the balance in five annual installments of
$8,000 on each June 30 beginning June 30, 2022. Assuming that an interest rate of 12% properly
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reflects the time value of money in this situation, at what amount should Johnstone value the
equipment?
2. Johnstone needs to accumulate sufficient funds to pay a $550,000 debt that comes due on
December 31, 2026. The company will accumulate the funds by making five equal annual deposits to
an account paying 9% interest compounded annually. Determine the required annual deposit if the
first deposit is made on December 31, 2021.
Harding Company is in the process of purchasing several large pieces of equipment from Danning
Machine Corporation. Several financing alternatives have been offered by Danning: (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables
provided.)
1. Pay $1,060,000 in cash immediately.
2. Pay $466,000 immediately and the remainder in 10 annual installments of $81,000, with the first
installment due in one year.
Determine the best alternative for Harding, assuming that Harding can borrow funds at a 11%
interest rate. (Round your final answers to nearest whole dollar amount.)
The following situations should be considered independently. (FV of $1, PV of $1, FVA of $1, PVA of
$1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
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3. Sam Robinson borrowed $16,000 from a friend and promised to pay the loan in 15 equal annual
installments beginning one year from the date of the loan. Sam’s friend would like to be reimbursed
for the time value of money at a 10% annual rate. What is the annual payment Sam must make to
pay back his friend?
2. Lease machine. The machine could be leased for a 10-year period for an annual lease payment of
$36,000 with the first payment due immediately. All insurance costs will be paid for by the Lollie
Corp. and the machine will revert back to Lollie at the end of the 10-year period.
Determine the future value of the following single amounts (FV of $1, PV of $1, FVA of $1, PVA of $1,
FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) (Round your final
answers to nearest whole dollar amount.):
Determine the present value of the following single amounts (FV of $1, PV of $1, FVA of $1, PVA of
$1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Round your final
answers to nearest whole dollar amount.):
2. The Weimer Corporation wants to accumulate a sum of money to repay certain debts due on
December 31, 2030. Weimer will make annual deposits of $140,000 into a special bank account at
the end of each of 10 years beginning December 31, 2021. Assuming that the bank account pays 7%
interest compounded annually, what will be the fund balance after the last payment is made on
December 31, 2030?
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Johnstone Company is facing several decisions regarding investing and financing activities. Address
each decision independently. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
(Use appropriate factor(s) from the tables provided.)
3. On January 1, 2021, Johnstone leased an office building. Terms of the lease require Johnstone to
make 15 annual lease payments of $135,000 beginning on January 1, 2021. A 12% interest rate is
implicit in the lease agreement. At what amount should Johnstone record the lease liability on
January 1, 2021, before any lease payments are made?
Harding Company is in the process of purchasing several large pieces of equipment from Danning
Machine Corporation. Several financing alternatives have been offered by Danning: (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables
provided.)
3. Make 10 annual installments of $150,000 with the first payment due immediately.
4. Make one lump-sum payment of $1,790,000 five years from date of purchase.
1. John Jamison wants to accumulate $65,810 for a down payment on a small business. He will invest
$36,000 today in a bank account paying 9% interest compounded annually. Approximately how long
will it take John to reach his goal?
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2. The Jasmine Tea Company purchased merchandise from a supplier for $35,098. Payment was a
noninterest-bearing note requiring Jasmine to make eight annual payments of $5,000 beginning one
year from the date of purchase. What is the interest rate implicit in this agreement?
Kiddy Toy Corporation needs to acquire the use of a machine to be used in its manufacturing process.
The machine needed is manufactured by Lollie Corp. The machine can be used for 10 years and then
sold for $21,000 at the end of its useful life. Lollie has presented Kiddy with the following options:
(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from
the tables provided.)
1. Buy machine. The machine could be purchased for $171,000 in cash. All insurance costs, which
approximate $16,000 per year, would be paid by Kiddy.
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