4. An annuity of R1000 per annum from 1984 to 1988 inclusive, and R1200 per annum from 1989 to 1993 Inclusive, is to be paid in equal half-yearly instalments on the 30th June and 31st December of each year. An intending purchaser of the annuity at 1st January, 1978 wishes to realize an effective rate of interest of 5% per annum on the whole of his investment, and to replace his capital by the end of 1993 by a level sinking fund to accumulate at an effective rate of Interest of 4% per annum. What price should he pay? 9

4. An annuity of R1000 per annum from 1984 to 1988 inclusive, and R1200 per annum from 1989 to 1993 Inclusive, is to be paid in equal half-yearly instalments on the 30th June and 31st December of each year. An intending purchaser of the annuity at 1st January, 1978 wishes to realize an effective rate of interest of 5% per annum on the whole of his investment, and to replace his capital by the end of 1993 by a level sinking fund to accumulate at an effective rate of Interest of 4% per annum. What price should he pay? 9

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 3MC: Electro Corporation bought a new machine and agreed to pay for it in equal annual installments of...

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Electro Corporation bought a new machine and agreed to pay for it in equal annual installments of 5,000 at the end of each of the next 5 years. Assume a prevailing interest rate of 15%. The present value of an ordinary annuity of 1 at 15% for 5 periods is 3.35. The future amount of an ordinary annuity of 1 at 15% for 5 periods is 6.74. The present value of 1 at 15% for 5 periods is 0.5. How much should Electro record as the cost of the machine? a. 12,500 b. 16,750 c. 25,000 d. 33,700
in equal annual installment of P600,000 at the end of each of Joshua Company bought a new machine and agreed to pay in equal annual installment of P600,000 at the end of each of the next five years. The prevailing interest rate for this type of transaction is 12%. The present value of an ordinary annuity of 1 at 12% for five periods is 3.60. The future amount of an ordinary annuity of i at 12% for five periods is 6.35. The present value of 1 at 12% for five periods is 0.567. 1. What amount should be reported as note payable if financial statements were prepared today? a. 1,700,000 b. 2,160,000 c. 3,000,000 d. 3,810,000 2. What is the interest expense for the first year? a. 259,200 b. 187,200 c. 360,000 d. 457,200
A perpetuity of $1 each year, with the first payment due immediately, has a present value of $25 at an annual effective rate of i%. The owner exchanges it for another perpetuity with the first payment due immediately and subsequent payments due at two year intervals. What should the payment of the second perpetuity be, in order to keep the same interest rate, i%, and the same present value? A B с D E Less than $1.90 At least $1.90, but less than $1.94 At least $1.94, but less than $1.98 At least $1.98, but less than $2.02 $2.02 or more
Find the present value at outset of a level annuity of £1500 per year, payable annually in arrears for 15 years, deferred for 6 years, if the effective rate of interest is 9% per annum during the first 10 years and 8% per annum thereafter.
A company signed an agreement to rent warehouse space for four years at $40,000 per year, payable at the beginning of each year. Assuming an annual interest rate of 6% is appropriate, the present value of an ordinary annuity is 3.46511 × 40,000 = $138,604, and the present value of an annuity due is 3.67301 × $40,000 = $146,920. At which amount should the rental obligation be recorded? $169,600 $160,000 $138,604 O $146,920
An annuity-immediate provides annual payments of 10 for 20 years. Immediately following the 11th payment, the annuity is exchanged for a perpetuity-immediate of equal value with semiannual payments. The present values at the time of the exchange are based on an annual effective interest rate of 6%. The first payment of the perpetuity is K and each subsequent payment is 0.5% larger than the previous payment. Calculate K. A) 1.53 (B) 1.67 (C) 2.37 (D) 3.42 (E) 3.74
Find the future value of the annuity due.S800 deposited at the beginning of each year for 13 years at 3%compounded annually
(c) (d) Mr Jones is to receive a deferred annuity of £2500 which starts at the end of the third year from now and continues for a period of 12 years from its start. Calculate the present value of this deferred annuity on the basis of a discount rate of 7% per annum. Show all your working. The probability that a life aged x will survive at least t further years is denoted by tpx. The future lifetime of a life aged x, denoted by Tx, has expectation E(Tx). Suppose that for a population of individuals tpx is given by (i) (ii) tpx -(1- 1/5 t for 0≤t≤125-x. 125-x Calculate the life expectancy E(Tx) for a person aged 55 from this population. Work out the force of mortality at age 90 for an individual aged 55.
WHAT IS THE ACCUMULATED AMOUNT OF THE FIVE-YEAR ANNUITY PAYING P6,000.00 AT THE END OF EACH YEAR, WITH INTEREST AT 15% COMPOUNDED ANNUALLY? a.P41,454.29 b.P40,544.29 c.P41,114.29 d.P40,454.29
A company needs to buy an annuity package that will provide a future income to an individual over a 33-year period at the following levels: £4421 paid at the beginning of each year for the first 13 years followed by £3318 paid at the beginning of each year up until year 33 (inclusive). Calculate in £s, to 2 decimal places, the price of this investment in order to assure the required payments, given that the rate of interest during this period is: 4.0% pa effective for the first 20 years and then 7.1% pa effective thereafter. (correct answer = 71829.14, ONLY formulas, no tables, please)
A company needs to buy an annuity package that will provide a future income to an individual over a 33-year period at the following levels: £4421 paid at the beginning of each year for the first 13 years followed by £3318 paid at the beginning of each year up until year 33 (inclusive). Calculate in £s, to 2 decimal places, the price of this investment in order to assure the required payments, given that the rate of interest during this period is: 4.0% pa effective for the first 20 years and then 7.1% pa effective thereafter. (no tables, only formulas, please)
A company will receive payments of $8,000 per year for the next five years under a subscription contract. The first payment will be made at the beginning of the contract. Assuming an annual interest rate of 4% is appropriate, the present value of an ordinary annuity is 4.45182 x $8,000 = $35,615, and the present value of an annuity due is 4.62990 x $8,000 = $37,039. Which amount must the company record for this sale in accordance with generally accepted accounting principles (GAAP) if collection is reasonably assured? $37,039 $0 $40,000 $35,615