Please check my answers and let me know if I am correct thank you.
1. Depreciation expense is located on the accounts receivable documentation
A. income statement
B. accounts payable documentation
C. balance sheet
My answer is A. income statement
2. When are annuity due payments made?
A. At the end of the period
B. Yearly
C. At the beginning of the period
D. Monthly
My answer is C. At the beginning of the period
3. At the beginning of each year, Mary invests $1,400 semiannually at 8% for nine years. Determine the cash value of the annuity due at the end of the nineth year.
A. $37,939.86
B. $37,339.68
C. $37,339.68
D. $37,399.68
My answer is C. $37,339.68
1. The answer is not A. income statement. Depreciation expense is not located on the accounts receivable documentation. To find the correct answer, we need to understand the purpose of depreciation expense. Depreciation is an accounting method used to allocate the cost of an asset over its useful life. It represents the wear and tear or the decrease in value of the asset over time. Depreciation expense is the portion of the asset's cost that is recognized as an expense in each accounting period.
To determine where depreciation expense is located, we need to look at the financial statements. Depreciation expense is usually included in the income statement, as it is considered an operating expense that reduces the company's net income. Therefore, the correct answer is A. income statement.
2. The answer is not C. At the beginning of the period. Annuity due payments are not made at the beginning of the period. To understand when annuity due payments are made, we need to differentiate between regular annuities and annuities due.
Regular annuities make payments at the end of each period, such as at the end of the year or the end of the month. However, annuities due make payments at the beginning of each period.
Given the question, "When are annuity due payments made?", the correct answer is A. At the end of the period, as regular annuities are the ones that make payments at the end of each period.
3. To calculate the cash value of the annuity due at the end of the ninth year, we need to use the present value of an annuity due formula. The formula is:
PV = PMT × [(1 - (1 + r)^-n) / r] × (1 + r),
where:
PV = Present Value
PMT = Periodic Payment
r = Interest Rate per Period
n = Number of Periods
Using this formula, we can calculate:
PMT = $1,400 (semiannual payment)
r = 8%/2 = 4% (semiannual interest rate)
n = 9 × 2 = 18 (total number of semiannual periods)
Now plug these values into the formula:
PV = $1,400 × [(1 - (1 + 0.04)^-18) / 0.04] × (1 + 0.04)
Calculating the value using a calculator or spreadsheet, the correct answer is A. $37,939.86. Therefore, your answer of C. $37,339.68 is incorrect.