Question

The following questions dealing with the time value of money are adapted from questions that previously appeared on Certified Management Accountant (CMA) examinations. The CMA designation sponsored by the Institute of Management Accountants (www.imanet.org) provides members with an objective measure of knowledge and competence in the field of management accounting. Determine the response that best completes the statements or questions.
1. Janet Taylor Casual Wear has $75,000 in a bank account as of December 31, 2009. If the company plans on depositing $4,000 in the account at the end of each of the next 3 years (2010, 2011, and 2012) and all amounts in the account earn 8% per year, what will the account balance be at December 31, 2012? Ignore the effect of income taxes.
a. $ 87,000
b. $ 88,000
c. $ 96,070
d. $107,500
2. Essex Corporation is evaluating a lease that takes effect on March 1. The company must make eight equal payments, with the first payment due on March 1. The concept most relevant to the evaluation of the lease is
a. The present value of an annuity due.
b. The present value of an ordinary annuity.
c. The future value of an annuity due.
d. The future value of an ordinary annuity.



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  • CreatedJune 24, 2013
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