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1. A savings plan requires 48 deposits of $553 per month commencing today. If the interest rate is 14.0% p.a compounding monthly, the value of the investment plan in exactly 4 years from today will be closest to:
a. $35725.32
b. $35313.33
c. $3102.39
d. $2721.39
2.Understand the importance of ethical behavior for management accountants.
Emily Henson, controller of an oil exploration division, has just been
approached by Tim Wilson, the divisional manager. Tim told Emily that the projected quarterly profits were unacceptable and that expenses need to be reduced. He suggested that a clean and easy way to reduce expenses is to assign the exploration and drilling costs of four dry holes to those of two successful holes. By doing so, the costs could be capitalized and not expensed, reducing the costs that need to be recognized for the quarter. He further argued that the treatment is reasonable because the exploration and drilling all occurred in the same field; thus, the unsuccessful efforts really were
the costs of identifying the successful holes. "Besides," he argued, "even if the treatment is wrong, it can be corrected in the annual financial statements.Next quarter's revenues will be more and can absorb any reversal without causing any severe damage to that quarter's profits. It's this quarter's profits that need some help."
Emily was uncomfortable with the request because generally accepted accounting principles do not sanction the type of accounting measures proposed by Tim.
3. you will receive $19,000 in 7 months and another $13,000 in 22 months. If the discount rate is 5% per annum (compounding monthly) for the first 10 months, and 10% per annum (compounding monthly) for the next 12 months, what single amount received today would be equal to the two proposed payments? (answer to the nearest whole dollar; don’t include the $ sign or commas)
4. You invest $3,000 and earn $596 over 22 months. What nominal rate of annual interest (compounding monthly) did you earn?
5. You owe your parents $27,000 (in present day dollars) and want to repay them in equal amounts the first to occur in 4 years from today and the other in 6 years from today. If the interest rate is 13.9% per annum compounding monthly, what will be the amount of each repayment?
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2. An individual, employee or a professional may face an ethical dilemma where it will be difficult for him / her to take a position or stand or decision. It becomes difficult to figure out what is good or bad, give the situation and circumstances. Ethical standards guide an accountant’s act in a challenging situation so that he / she can meet his obligations towards the profession, organization and public.
There are four overarching ethical principles
|
Sl. No. |
Principle |
What it means |
|
1. |
Honesty |
Truthfulness, sincere, frank, straightforward of conduct, fairness, displaying integrity, freedom from deceit or fraud |
|
2. |
Fairness |
Unbiased, honest, acting in an impartial manner, free from dishonesty or injustice, open-minded, tolerant, accepting, communicating information fairly and objectively |
|
3. |
Objectivity |
Judgement based on established sets of criteria, unbiased and free from prejudice |
|
4. |
Responsibility |
Doing what you say you will do when you say you will do it, answerable or accountable for something that is within one's own power, control or management |
Emily is facing an ethical dilema here. Suggestion by Tim should not be acted upon because it violates all the four overarching principles of ethical behavior for management accountants.
Emily should not succumb to the opinion or advice. She needs to overpower her desire. She should act honestly, fairly and objectively and not understate the expenses.
3. In this particular question, basically we have to find the sum of the present value of both the amounts. The PV of both the amounts will be equal to the single amount we receive today.
For the $19,000, time period = 7 months and rate = 5%
Present Value = Amount / ( 1+rate/12)^months
Present Value = $19000 / ( 1+5%/12)^7
Present Value = $18,454.96
For the $13,000, time period = 22 months and rate = 5% for first 10 months and 10% for next 12 months
Present Value at the end of 10 months = $13000 / ( 1+10%/12)^12
Present Value at the end of 10 months = $11,767.76
Present Value now = Present Value at the end of 10 months / ( 1+5%/12)^10
Present Value now = $11,767.76 / ( 1+5%/12)^10
Present Value now = $11,288.49
Total Amount = $18,454.96 + $11,288.49
Total Amount = $29,743
4.So we have got
Principal amount - 3000
Interest earned = 596
Total maturity amount - 3596
over a period of 22 months ,
As per the compounding formula we know ,
But we have got monthly compounding,
So we are going to apply annual rate as r/months or r/12 where 12 is the number of months
and for time we have got , t = 22 months .
So
3596 = 3000( 1+ 0.01r/12)^22
or 0.01 r/ 12 = 1.00827 -1
or 0.01r/12 = 0.00827
or 0.01r = 0.09924
or r = 9.92% p.a compounded monthly approx.
please see the attached file.
5. Please use this google drive link to download the answer file.
https://drive.google.com/file/d/138h0FwQXkHyyQvo4C5lDVHE5_eBhVDCp/view?usp=sharing
Note: If you have any trouble in viewing/downloading the answer from the given link, please use this below guide to understand the whole process.
https://helpinhomework.org/blog/how-to-obtain-answer-through-google-drive-link
