FM MIDTERM QUIZ with answers

1. Luffy invested his P1,000,000 retirement pay at 8% compounded monthly. How much
will he or his heirs receive a monthly pension at the end of each month for the next 10
years?
R= payments
PV= 1,000,000

Origination of formula:
Apply cross multiplication then derive formula:

R= PV x i
1-(1+i)-n
R= 1,000,000 x (0.08/12)
1-(1+(0.08/12)-(10 x 12)
R= 6,666.66666
0.54947653934
R= 12, 132.76

2. Luffy buys a car and pays 200,000 cash and a condition to pay 15,000 at the end of each
month for 2 years to pay all the principal and interest at the rate of 6% compounded
monthly. How much is the cash price of the car?
Cash price= PV of payment + Cash paid

Cash price = 338,442.99363 + 200,000

Cash price= 538,443
3. Luffy buys a car and pays 200,000 cash and a condition to pay 15,000 at the end of each
month for 2 years to pay all the principal and interest at the rate of 6% compounded
monthly. How much is his remaining liability at the beginning of the 10th installment of
15,000?

PVOA= 216,249.37 remaining liability

4. Luffy buys a car and pays 200,000 cash and a condition to pay 15,000 at the end of each
month for 2 years to pay all the principal and interest at the rate of 6% compounded
monthly. How much is the interest accrued at the end of the 7th installment?
2 years x 12 months= 24 Total installments/periods (n)
 Interest accrued at the end of the 7th installment= 455.66

5. Luffy buys a car and pays 200,000 cash and a condition to pay 15,000 at the end of each
month for 2 years to pay all the principal and interest at the rate of 6% compounded
monthly. How much is his remaining liability if the covenant is revised to pay 15,000 at
the end of each quarter at the end of the 3rd installment?

71,739.67 remaining liability

6. Luffy buys a car and pays 200,000 cash and a condition to pay 15,000 at the end of each
month for 2 years to pay all the principal and interest at the rate of 6% compounded
monthly. How much is the cash price of the car if the covenant is revised to pay 15,000
at the end of each quarter for 2 years?

Cash price = 312,288.88

7. On March 2000, a company agreed to pay Mr. Luffy the amount of 500 at the end of
each month for 8 years. No payment was made until March 1,2010. How much should
be paid by the company if Mr.Luffy charges 5% compounded fortnightly from 2000 to
March 1,2007?

FVoa= 108,833.57
8. On March 2000, a company agreed to pay Mr. Luffy the amount of 500 at the end of
each month for 8 years. No payment was made until March 1,2010. How much should
be paid by the company if Mr.Luffy charges 5% compounded fortnightly from 2000 to
March 1,2010?
Step 1: Compute for the FV of Deferred annuity in 2008

Step 2: Compute for compound interest for 2 years (2009 and 2010)

141,144.89 should be paid from the compound interest because there is no periodic
payment (annuity) of 500 to be recorded for 2009-2010; only the compound interest
shall be paid
9. Luffy Company is preparing its common-size FS and revealed the following information
below (in thousand pesos). How would Luffy’s retained earnings appear on a common-
size balance sheet?
If common size balance sheet- the basis should be from the TOTAL ASSETS

Accounts receivable 10,000

Inventory 20,000
Total current assets 35,000
Total assets 84,000
Bonds payable 21,000
Retained earnings 7,000
Sales revenue 75,000
COGS 62,000
Income taxes expense 22,000

Retained earnings 7,000

/ Total assets 84,000
8.33%
10. Luffy Company is preparing its common-size FS and revealed the following information
below (in thousand pesos). How would Luffy’s inventory appear on a common-size
balance sheet?
If common size balance sheet- the basis should be from the TOTAL ASSETS

Accounts receivable 10,000

Inventory 20,000
Total current assets 35,000
Total assets 84,000
Bonds payable 21,000
Retained earnings 7,000
Sales revenue 75,000
COGS 62,000
Income taxes expense 22,000

Inventory 20,000
/ Total assets 84,000
23.81%
11. Luffy Company is preparing its common-size FS and revealed the following information
below (in thousand pesos). How would Luffy’s COGS appear on a common-size
INCOME STATEMENT?
If common size INCOME STATEMENT- the basis should be from the SALES
 Accounts receivable 10,000
Inventory 20,000
Total current assets 35,000
Total assets 84,000
Bonds payable 21,000
Retained earnings 7,000
Sales revenue 75,000
COGS 62,000
Income taxes expense 22,000

COGS 62,000
/ SALES 75,000
82.67%
12. LUFFY Division reported the following results for 2022 below. What is Luffy Division’s
RETURN ON SALES?
ANNUAL SALES P500,000
NET EARNINGS 80,000
INVESTMENT 250,000

RETURN ON SALES = Net earnings or net sales = 80,000 = 16%

Annual sales 500,000
13. Luffy Construction company entered into a contract for the payment of 500,000 at the
end of each year for 5 years. What interest rate compounded annually would this
agreement be equivalent to a cash payment of P12,000,000?
0, since Sir haven’t given any formula or answer yet. He said that we should input “0” if
unsure on answer.
14. What interest rate compounded semiannually will 320,000 buys an annuity of 500
payable semiannually for 5.5 years?
0, since Sir haven’t given any formula or answer yet. He said that we should input “0” if
unsure on answer.
15. Find the present value and the amount of an annuity due paying 2,000 semiannually for
a term of 9.5 years if money is worth 6%.

PV= 29,507.03 and FV (amount of annuity due) = 51,740.75

16. If 3,000 is deposited at the beginning of each 6 months for 10 years at 7% compounded
semiannually, how much is in the fund at the end of 6.5 years after the payment?
 FVAD = 50,030.96

or we can also use the formula for FVAD:

17. If 3,000 is deposited at the beginning of each 6 months for 10 years at 7% compounded
semiannually, how much is in the fund at the beginning of 10 years?

FVad= 76,071.54
18. To create a fund worth 500,000 at the end of 5 years, 15 members of a cooperative
association agreed to contribute equal payments at the beginning of each month. How
much will each member contribute monthly if the money is invested at 8%
compounded monthly?

A= 450.65 for each member

19. Determine the present value of 10 equal semiannual payments of 600 where the first
payment starts at the end of 2.5 years if money is worth 4%?

20. LUFFY Division reported the following results for 2022 below. What is Luffy Division’s
ASSET TURNOVER?
ANNUAL SALES P500,000
NET EARNINGS 80,000
INVESTMENT 250,000

ASSET TURNOVER= Sales/ Investment (or the total asset) = 500,000/250,000= 2

Note: if in terms of TURNOVER, the numerator is mostly based on SALES

21. LUFFY Division reported the following results for 2022 below. What is Luffy Division’s
Return on Investment (ROI)?
ANNUAL SALES P500,000
NET EARNINGS 80,000
INVESTMENT 250,000

ROI= Net earnings/ Investment = 80,000/250,000= 32%

Note: if in terms of RETURN, the numerator is mostly based on NET INCOME
22. On Jan. 7,2022, Luffy Company discounted its own P100,000, 180-day note at One Piece
Bank at a discount rate of 20%. Luffy repaid the note on July 6,2022, the due date. Based
on a 360-day year, the effective rate of interest on the borrowing was:
EIR=
23. A borrower agreed to discharge his debt by paying a sequence of 10 equal semiannual
payments. The first payment is due at the end of 3.5 years. Determine the number of
semiannual payments if the
24. Luffy Inc has an inventory conversion period of 60 days, a receivable conversion period
of 35 days, and a payment cycle to 26 days. If its sales for the period just ended
amounted to P972,000, what is the investment in accounts receivable? (assume 360
days in a year)
Accounts receivable= Average no. of days to collect/number of days in a year x Sales=
35/360 x 972,000 = 94,500
25. Luffy Inc has an inventory conversion period of 60 days, a receivable conversion period
of 35 days, and a payment cycle to 26 days. If its sales for the period just ended
amounted to P972,000, what is the investment inventory (assume 360 days in a year)
Average no. of days of inventory conversion/number of days in a year x Sales= 60/360 x
972,000 = 162,000

26. Luffy signs a 4,200, 120-day not at the bank and receives proceeds of 4,130. What is the
discount rate?
27. Luffy signs a 4,500 discount note. The bank charges 18% discount rate and the proceeds
are 3,487.50. find the time of the note?