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Brief Exercise 6-6
Steve Madison needs $328,500 in 10 years. (Use the tables below.)




How much must he invest at the end of each year, at 12% interest, to meet his needs? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

Investment amount  
$
[removed]
 
 
 
 
Brief Exercise 6-10
Henry Quincy wants to withdraw $32,340 each year for 12 years from a fund that earns 8% interest. (Use the tables below.)








How much must he invest today if the first withdrawal is at year-end? How much must he invest today if the first withdrawal takes place immediately? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

First withdrawal at year-end  
$
[removed]
First withdrawal immediately  
$
[removed]
 
 
 
 
Brief Exercise 6-14
Amy Monroe wants to create a fund today that will enable her to withdraw $31,310 per year for 7 years, with the first withdrawal to take place 5 years from today. (Use the tables below.)



If the fund earns 10% interest, how much must Amy invest today?(Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

Investment amount  
$
[removed]
 
 
 
 
Exercise 6-5 (Part Level Submission)
Using the appropriate interest table, compute the present values of the periodic amounts, due at the end of the designated periods.
 
 
(a)
(Use the table below.)


$52,050 receivable at the end of each period for 8 periods compounded at 11%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Present value  
$
[removed]
 
 
(b)
(Use the table below.)


$52,050 payments to be made at the end of each period for 18 periods at 10%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Present value  
$
[removed]
 
 
(c)
(Use the tables below.)



$52,050 payable at the end of the seventh, eighth, ninth, and tenth periods at 11%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Present value  
$
[removed]
 
 
 
 
Exercise 6-8 (Part Level Submission)
Clarence Weatherspoon, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on an 9% basis that will enable him to withdraw $34,000 per year on June 30, beginning in 2018 and continuing through 2021. To develop this fund, Clarence intends to make equal contributions on June 30 of each of the years 2014–2017.
 
 
(a)
(Use the table below.)



How much must the balance of the fund equal on June 30, 2017, in order for Clarence Weatherspoon to satisfy his objective? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Balance of the fund equal on June 30, 2017  
$
[removed]
 
 
(b)
(Use the table below.)



What are each of Clarence’s contributions to the fund? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Clarence’s contributions to the fund  
$
[removed]
 
 
 
 
Exercise 6-11 (Part Level Submission)
Sosa Excavating Inc. is purchasing a bulldozer. The equipment has a price of $102,000. The manufacturer has offered a payment plan that would allow Sosa to make 15 equal annual payments of $14,185, with the first payment due one year after the purchase.
 
 
(a)
How much total interest will Sosa pay on this payment plan? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Total interest  
$
[removed]
 
 
(b)
Sosa could borrow $102,000 from its bank to finance the purchase at an annual rate of 10%. (Use the table below.)



Should Sosa borrow from the bank or use the manufacturer’s payment plan to pay for the equipment?

[removed]
 
 
 
 
Exercise 6-15
Andrew Bogut just received a signing bonus of $1,000,000. His plan is to invest this payment in a fund that will earn 9%, compounded annually. (Use the tables below.)




 
 
If Bogut plans to establish the AB Foundation once the fund grows to $2,171,890, how many years until he can establish the foundation?

[removed]
 years
 
 
Instead of investing the entire $1,000,000, Bogut invests $300,000 today and plans to make 9 equal annual investments into the fund beginning one year from today. What amount should the payments be if Bogut plans to establish the $2,171,890 foundation at the end of 9 years? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Payments  
$
[removed]
 
 
 
 
Exercise 6-21
Keith Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 4 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 4 years, by conducting some research online, Keith has developed the following estimates.

Engine Overhaul
Estimated Cash Outflow
 
Probability
Assessment
$250     10 %
530     30 %
840     50 %
880     10 %

(Use the tables below.)




How much should Keith Bowie deposit today in an account earning 6%, compounded annually, so that he will have enough money on hand in 4 years to pay for the overhaul? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Deposit amount  
$
[removed]
 
 
 
 
IFRS Multiple Choice Question 02
Martin Industries maintains its accounting records using IFRS. The company purchases equipment with a price of $400,000. The manufacturer has offered a payment plan that would allow Martin to make 10 equal annual payments of $49,316, with the first payment due one year after the purchase.

How much total interest will Martin pay on this payment plan?


$49,316

$40,000

$160,000

$93,160
 
 
 
 
 
IFRS Multiple Choice Question 05
Moore Industries manufactures exercise equipment. Recently the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company’s exercise equipment. After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing $3,000,000 of 11% bonds on March 1, 2014, due on March 1, 2029, with interest payable each March 1 and September 1. At the time of issuance, the market interest rate for similar financial instruments is 10%. What is the selling price of the bonds?


$2,536,455

$3,230,594

$1,904,664

$3,330,000
 
 
 
 
 
IFRS Multiple Choice Question 06
Reegan Company owns a trade name that was purchased in an acquisition of Hamilton Company. The trade name has a book value of $1,800,000, but according to IFRS, it is assessed for impairment on an annual basis. To perform this impairment test, Reegan must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Reegan’s estimate of annual cash flows over the next 7 years. The trade name is assumed to have no residual value after the 7 years. (Assume the cash flows occur at the end of each year.)

Probability Assessment Cash Flow Estimate
30% $240,000
50% 365,000
20% 425,000

Reegan determines that the appropriate discount rate for this estimation is 6%. To the nearest dollar, what is the estimated fair value of the trade name?


$1,800,000

$1,895,218

$ 339,500

$1,030,000
 
 
 
 
 
IFRS Multiple Choice Question 07
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

$396,000

$360,000

$180,000
 
 
 
 
 
IFRS Multiple Choice Question 08
Maxim Company leased an office under a five-year contract, which has been accounted for as an operating lease. Faced with the downturn in the economy, the viable company decided to sub-lease the office. However, they have had no luck with this effort and the landlord will not allow the lease to be cancelled. The payments are $8,000 per year and there are four years left on the lease. The company’s most recent interest rate for financing from a bank is 6%. The risk-free rate on government bonds is 4%. What is the provision for the lease under IFRS?


$29,040

$30,096

$32,000

$27,721
 
 
 
 

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