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Next Quiz on March 10th!


Accounting Assortment Quiz

Accountants are lifelong students. The weekly quizzes are open
to everyone in the wonderful field of accounting, business
and the study of accounting. Good luck!

This week's quiz brought to you by:
Barbara W. Scofield, PhD, CPA - Associate Professor of Accounting
and Director of the Financial Accounting Concentration
University of Dallas
Irving, Texas



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1 - Time value of money concepts can be used to value:
Assets only
Liabilities only
Assets and Liabilities
Neither Assets nor Liabilities

2 - Present value of a sum increases as:
Interest rates increase
The amount of the sum increases
The length of time between the present time and the cash flow increases
None of the alternatives result in a larger present value

3 - Future value of an ordinary annuity increases as:
Interest rates increase
The amount of the annuity increases
The number of annuity payments increases
All of the alternatives result in a larger future value.

4 - Leases typically require the first payment when the lease is initiated. Which time value of money concept best fits with the timing of cash flows in this transaction?
Annuity Due
Ordinary Annuity
Deferred Annuity
Leases are usually not annuities.

5 - Notes typically require an initial payment in the month following the funding of the note. Which time value of money concept best fits with the timing of cash flows with this transaction?
Annuity Due
Ordinary Annuity
Deferred Annuity
Notes are usually do not involve annuities.

6 - A company is required by its bond covenants to set aside funds each year throughout the life of the bond into a sinking fund so that the company has enough to repay the maturity value of a bond issuance on its maturity date. Which time value of money concept will be used to calculate the amount that needs to be put into the sinking fund each period?
Present value of a sum
Present value of an ordinary annuity
Future Value of a sum
Future value of an ordinary annuity

7 - A company is purchasing custom equipment from its manufacturer for ten installment payments of $1000 per quarter. There is no available fair market value because of the specialized nature of the assets. What additional information is needed in order to find the value of the note payable on this equipment?
Interest rate at which the purchaser is otherwise able to borrow funds.
Prime interest rate at the time the equipment is purchased.
Interest rate that the manufacturer usually charges its customers.
No additional information is needed.

8 - A company issued bonds when the market interest rate was 6% (annual). Now that the market interest rate is 4% (annual), the company wants to buy back the bonds. Which of the following is true?
The company will recognize a gain on bond retirement when it repurchases the bonds.
The company will recognize a loss on bond retirement when it repurchases the bonds.
The company will recognize no gain or loss on bond retirement when it repurchases the bond.
There is not enough information to know whether there is a gain or loss when it repurchases a bond.

9 - A company issued zero-coupon bonds when the market interest rate was 6%. Which of the following is true?
The company will recognize no interest expense until the bond matures.
The company will recognize the same amount of interest expense each period until the bond matures.
The company will recognize an increase in Bond Payable each period until the bond matures.
The company will recognize a decrease in Bond Payable each period until the bond matures.

10 - A company issued $1,000,000 face value of bonds with an annual coupon interest rate of 10% when the market interest rate was 12% for $886,996. Interest is paid annually. Interest expense in the first year is:
10% * 1,000,000
12% * 1,000,000
10% * 886,996
12% * 886,996

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