Net Present Value Quiz – Accounting & Finance

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Net Present Value – Quiz Packets – Accounting & Finance

The key terms in these Accounting chapters include Net Present Value, Salvage Value, Adjusted Cash Balance, Present Value, Allowance for Doubtful Accounts, Accounts Receivable Quiz Packets – Accounting & Finance


Which of the following is how the present value index is calculated?

Present Value PV of Outflows – PV of Inflows

(PV of Inflows)/(PV of Outflows)

(PV of Outflows)/(PV of Inflows)

Present Value, PV of Inflows – PV of Outflows


Franklin Company deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on August 31, its Cash account shows a debit balance of $14,162. Franklin’s August bank statement shows $15,037 on deposit in the bank. Determine the adjusted cash balance using the following information:
 

  
Deposit in transit$4,800
Outstanding checks$4,100
Bank service fees, not yet recorded by company$60
The bank collected on a note receivable, not yet recorded by the company$1,635


The adjusted cash balance should be:

$19,837

 $10,937.

$15,797

$14,102

$15,737 – Correct

Explanation
    
Bank balance$15,037Book balance$14,162
+ Deposit in transit 4,800Bank service fees -60
– Outstanding checks -4,100Note collected 1,635
Adjusted bank balance$15,737Adjusted book balance$15,737

What is the net present value of the freezer?

101.67


What is the net present value of the stand?

28.6


Your parents tell you that they will give you $10,000 as a gift when you graduate in four years.  Assuming you can earn a return of 10% per year, what amount of money could they give you today that would be of equivalent value?

6,830.13


Westbrook Corp is considering purchasing a triple-double producing machine to help with overall company production.  The machine costs $175,000 and is expected to have an eight-year useful life with a salvage value of $16,000.  Westbrook also expects to pay $15,000 to update the machine after 3 years of use.  The machine is expected to generate $30,000 of net cash flow each year.  Westbrook desires to earn a rate of return of 7%.

What is the present value of the salvage value?

9,312.15


Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $4,100 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is:

Accounts Receivable—A. Hopkins4,100 
Allowance for Doubtful Accounts 4,100
Allowance for Doubtful Accounts4,100 
Bad debts expense 4,100
Accounts Receivable—A. Hopkins4,100 
Bad debts expense 4,100
Cash4,100 
Accounts Receivable—A. Hopkins 4,100
Allowance for Doubtful Accounts4,100 
Accounts Receivable—A. Hopkins 4,100

Correct

Cash4,100 
Accounts Receivable—A. Hopkins 4,100

What is the net present value of the freezer?

101.67

What is the net present value of the stand?

28.6


A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $24,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $675. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Bad Debts Expense24,750 
Allowance for Doubtful Accounts 24,750
Bad Debts Expense24,075 
Allowance for Doubtful Accounts 24,075
Bad Debts Expense25,425 
Allowance for Doubtful Accounts 25,425

Correct

Accounts Receivable24,750 
Bad Debts Expense675 
Sales 25,425
Accounts Receivable25,425 
Allowance for Doubtful Accounts 25,425
Explanation
    
Desired balance in allowance account:$24,750credit
Current balance: 675debit
Required: adjustment to allowance$25,425credit

Which of the following is how the present value index is calculated?

Present Value PV of Outflows – PV of Inflows

(PV of Inflows)/(PV of Outflows)

(PV of Outflows)/(PV of Inflows)

Present Value, PV of Inflows – PV of Outflows


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