ch06_sol

InstructionsInstructions for the Microsoft Excel Templates by Rex A SchildhouseBe advised, the template workbooks and worksheets are not protected.Overtyping any data may remove it.

Extensive detail and information is contained within the help function of Microsoft Excel and in the provided text.You should enter your name, date, instructor's name, and course into the cells at the top of the page. This information will be printed on the top of each page if the template requires more than one page.Each template is set to print with File Name, Page # of # Page(s), the print date, and the print time to assist in assembly of multiple pages.

If more than one page is required by the template, manual page breaks have been set to provide consistent presentation.All of the cells have been correctly formatted for presentation and should not require any adjustment. For example, if the text requires one, two, or three significant digits in a presentation, the template has been set for that presentation in the appropriate cells.

In general, the yellow highlighted cells are the cells which work and effort should be presented. These entries may include date(s), account title(s), values, memorandum appropriate to the entry, or text answers to questions.

And information or data which may be required by the solution will be entered in cells with borders to help identify them.Where a yellow highlighted cell shows "Date" enter the appropriate date for that step of the challenge. This may be any date format that Microsoft Excel accepts. Some of these formats include "1/1/12", "01/01/12", and "01/01/2012." All of these will return January 01, 2012, in the format set in the template.

Where a yellow highlighted cell shows "Acct Nbr" enter the appropriate account number, provided in the template and in the text for that step of the challenge. This is entry may be a "Look to" formula to another cell where that information has been provided or previously entered.

Where a yellow highlighted cell shows "Account Title" enter the appropriate account title for that step of the challenge. This is a text entry and most of those cells are set for the proper indentation for that step. Frequently the chart of accounts appropriate to the challenge is provided and you can use the "look to" formula to reference the appropriate account title without typing it.

Check with your instructor to see if abbreviated account titles are acceptable. For example "A/R" for Accounts Receivable, "A/P" for Accounts Payable. If your instructor is using a comparison process between workbooks for grading, these abbreviates may not be acceptable.

Where a yellow highlighted cell shows titles such as "Values," "Amounts," or "Quantities" enter the appropriate numerical value for that step of the challenge. The cell is formatted for proper presentation of the entered information. If a dollar sign is appropriate, it should not be entered, Microsoft Excel will place it there through formatting. Commas and significant digits (decimals) are also set through formatting for common presentation. Since the formatting of the templates is not protected by any password, you may change any of the formatting found in the templates to meet your desires.

Where a yellow highlighted cell shows titles such as "Formula" you may enter the appropriate formula or enter a numerical value appropriate for that step of the challenge. Most of the values necessary for the appropriate formula are located on the template in cells with borders or in other yellow highlighted cells. The formula may be a simple "Look to" formula, an equal sign and a cell reference, "=E27" or more complex as "=E27*5," or something similar to the time-value-of-money formula. These are addressed in the tutorial text provided for Microsoft Excel.

Where a yellow highlighted cell shows "Text" enter the appropriate text for that step of the challenge. This may be a memorandum entry for a journal entry or a lengthy text answer discussing the results of an analysis of a company's financials. These titles can simply be typed over.

Where a yellow highlighted cell shows titles such as "Journal Number" or "Journ #" you should enter the appropriate number provided in the template and in the text for that step of the challenge. In general this will appear in instances such as "Record the following events in General Journal number six."

The print area is defined to fit onto 8 1/2" 11" sheets in portrait or landscape mode as required. Margins are generally set to no less than 1/2" so most printers can print them without a problem. If you printer cannot accept margins less than 1" you may have to reformat the margins through Page Setup.

The display may have "Freeze Pane" invoked so column titles remain visible during data entry. This can be removed by utilizing the View menu and selecting "Unfreeze Panes" under "Freeze Panes."

When negative values are required, enter them by starting with a minus sign, "-". Negative values may be shown as ($400) or -$400. Negative values in formulas can be created by putting a minus sign in front of the cell reference - "=E10*-E11" will return a negative value if both cells E10 and E11 contain positive values.

Microsoft Office and Microsoft Excel are products of, and copyrighted by,Microsoft Corporation, One Microsoft Way, Redmond, Washington 98052-6399

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Exercise 6-2 Solution

Name:SolutionDate:Instructor:Course:Intermediate Accounting, 14th Edition by Kieso, Weygandt, and WarfieldPrimer on Using Excel in Accounting by Rex A Schildhouse

E6-2 (Simple and Compound Interest Computations) Lyle OKeefe invests$30,000at8%annual interest, leaving the money8years. At the end of the8years, Lyle withdrew the accumulated amount of money.

Instructions:(a) Compute the amount Lyle would withdraw assuming the investment earns simple interest.Simple interest of $30,000 8% per year 8 years =$19,200Principal$30,000Total withdrawn$49,200

(b) Compute the amount Lyle would withdraw assuming the investment earns interest compounded annually.

Interest compounded annuallyFuture value of 1 @ 8% for 8 periods =1.85093Amount invested:$30,000Total withdrawn:$55,527.91

(c) Compute the amount Lyle would withdraw assuming the investment earns interest compounded semi-annually.

Interest compounded annuallyFuture value of 1 @ 4% for 16 periods =1.87298Amount invested:$30,000Total withdrawn:$56,189.44

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Exercise 6-2

Name:Date:Instructor:Course:Intermediate Accounting, 14th Edition by Kieso, Weygandt, and WarfieldPrimer on Using Excel in Accounting by Rex A Schildhouse

E6-2 (Simple and Compound Interest Computations) Lyle OKeefe invests$30,000at8%annual interest, leaving the money8years. At the end of the8years, Lyle withdrew the accumulated amount of money.

Instructions:(a) Compute the amount Lyle would withdraw assuming the investment earns simple interest.Text TitleFormulaText TitleAmountText TitleFormula

(b) Compute the amount Lyle would withdraw assuming the investment earns interest compounded annually.

Text TitleFormulaText TitleAmountText TitleFormula

(c) Compute the amount Lyle would withdraw assuming the investment earns interest compounded semi-annually.

Text TitleFormulaText TitleAmountText TitleFormula


Exercise 6-3 Solution


E6-3 (Computation of Future Values and Present Values) Using the appropriate interest table or Excel formula, answer each of the following questions: (Each case is independent of the others.)

(a) What is the future value of$9,000at the end of5periods at8%compounded interest?The future value of $9,000 at 8% interest for 5 periods is:$13,223.95

(b) What is the present value of$9,000due8periods hence,discounted at11%The future value of $9,000 at 11% interest for 8 periods is:$3,905.34

(c) What is the future value of15periodic payments of$9,000each made at the end of each period and compounded at10%?The future value of $9,000 payments at 10% interest for 15 periods is:$285,952.34

(d) What is the present value of$9,000to be received at the end of each of20periods, discounted at5%compound interest?The present value of $9,000 payments at 5% interest for 20 periods is:$112,159.89

Note: Students using the tables or other sources of present and future values may have values slightly different due to rounding.


Exercise 6-3


E6-3 (Computation of Future Values and Present Values) Using the appropriate interest table or Excel formula, answer each of the following questions: (Each case is independent of the others.)

(a) What is the future value of$9,000at the end of5periods at8%compounded interest?Text as appropriate.Fomula

(b) What is the present value of$9,000due8periods hence,discounted at11%Text as appropriate.Formula

(c) What is the future value of15periodic payments of$9,000each made at the end of each period and compounded at10%?Text as appropriate.Formula

(d) What is the present value of$9,000to be received at the end of each of20periods, discounted at5%compound interest?Text as appropriate.Formula

Note: Students using the tables or other sources of present and future values may have values slightly different due to rounding.


Problem P6-2 Solution


P6-2 (Various Time Value Situations) Using the appropriate interest table or Excel formula, provide the solution to each of the following four questions by computing the unknowns.

(a) What is the amount of the payments that Ned Winslow must make at the end of each of8years to accumulate a fund of$90,000by the end of the eighth year, if the fund earns8%interest, compounded annually?

The payment that must be made to accumulate $90,000 over 8 periods at 8% interest is:$8,461.33

(b) Robert Hitchcock is40years old today and he wishes to accumulate$500,000by his65th birthday so he can retire to his summer place on Lake Hopatcong. He wishes toaccumulate this amount by making equal deposits on his fortieth through sixty-fourth birthdays. What annualdeposit must Robert make if the fund will earn12%interest compounded annually?

The annual deposit that must be made to accumulate $500,000 over 25 periods at 12% interest is:$3,348.20

(c) Diane Ross has$20,000to invest today at9%to pay a debt of$47,347How many years will it take her to accumulate enough to liquidate the debt?

The duration that the deposit must remain in place to accumulate to $47,347 at 9% interest is:10

(d) Cindy Houston has a$27,600debt that she wishes to repay in4years fromtoday; she has$19,553that she intends to invest for the4years. What rate of interestwill she need to earn annually in order to accumulate enough to pay the debt?

The interest that the deposit must earn while in place to accumulate from $19,553 to $27,600 over 4 periods is:9.00%


Problem P6-2


P6-2 (Various Time Value Situations) Using the appropriate interest table or Excel formula, provide the solution to each of the following four questions by computing the unknowns.

(a) What is the amount of the payments that Ned Winslow must make at the end of each of8years to accumulate a fund of$90,000by the end of the eighth year, if the fund earns8%interest, compounded annually?

Text TitleFormula

(b) Robert Hitchcock is40years old today and he wishes to accumulate$500,000by his65th birthday so he can retire to his summer place on Lake Hopatcong. He wishes toaccumulate this amount by making equal deposits on his fortieth through sixty-fourth birthdays. What annualdeposit must Robert make if the fund will earn12%interest compounded annually?

Text TitleFormula

(c) Diane Ross has$20,000to invest today at9%to pay a debt of$47,347How many years will it take her to accumulate enough to liquidate the debt?

Text TitleFormula

(d) Cindy Houston has a$27,600debt that she wishes to repay in4years fromtoday; she has$19,553that she intends to invest for the4years. What rate of interestwill she need to earn annually in order to accumulate enough to pay the debt?

Text TitleFormula


Problem P6-4 Solution


P6-4 (Evaluating Payment Alternatives) Howie Long has just learned he has won a$500,000prize in the lottery. The lottery has given him two options for receiving payments: (1) If Howie takes all the money today, the state and the federal governments will deduct taxes at a rate of46%immediately. (2) Alternatively, the lottery offers Howie a payout of20equal paymentsof$36,000with the first payment occurring when Howie turns in the winning ticket. Howie will be taxed on each of these payments at a rate of25%

Instructions:Assuming Howie can earn an8%rate of return (compounded annually) on any money investedduring this period, which pay-out option should he choose?

Step 1: Determine of single payment cash yield:$270,000

Step 2: Determine the present value of an annuity of $36,000 less 25% in taxes for 20 periods.Cash payment is:$36,000Tax burden is:25%Annual cash yield is:$27,000

The present value of an annuity of $27,000 for 20 periods at 8% interest is:$286,297.18

Long should choose the annuity payout; its present value is $16,297 greater.

Note: Due to significant digits of formulas, calculators, and tables, minor value differences may occur.


Problem P6-4


P6-4 (Evaluating Payment Alternatives) Howie Long has just learned he has won a$500,000prize in the lottery. The lottery has given him two options for receiving payments: (1) If Howie takes all the money today, the state and the federal governments will deduct taxes at a rate of46%immediately. (2) Alternatively, the lottery offers Howie a payout of20equal paymentsof$36,000with the first payment occurring when Howie turns in the winning ticket. Howie will be taxed on each of these payments at a rate of25%

Instructions:Assuming Howie can earn an8%rate of return (compounded annually) on any money investedduring this period, which pay-out option should he choose?

Step 1: Determine of single payment cash yield:Formula

Step 2: Determine the present value of an annuity.Cash payment is:AmountTax burden is:PercentageAnnual cash yield is:Formula

Text TitleFormula

Enter text answer here.

Note: Due to significant digits of formulas, calculators, and tables, minor value differences may occur.


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