202589-10-62P

AID: 7725 | 12/06/2015

1. Customer List:
Outcome 1:
Present value of Annuity $1 for 5 years at the rate of 7% is 4.100 Calculate Present
value for Outcome 1.It is calculated by multiplying Present value of Annuity $1 with
future value.
Present Value = Present Value Of Annuity $1Future Value
= 4.100 40, 000
$164, 000

Note:
Future value (FV)
Interest rate (I)
Time period (N)

$40.000
7%
5 years

Outcome 2:
Present value of Annuity $1 for 4 years at the rate of 7% is 3.387 Calculate Present
value for Outcome 2. It is calculated by multiplying Present value of Annuity $1 with
future value.
Present Value = Present Value Of Annuity $1Future Value
= 3.387 18, 000
$60,966

Note:
Future value (FV)
Interest rate (I)
Time period (N)
Present value (PV)

$18.000
7%
4 years
$60.966

Outcome 3:
Present value of Annuity $1 for 3 years at the rate of 7% is 2.624 Calculate Present
value for Outcome 3. It is calculated by multiplying Present value of Annuity $1 with
future value.
Present Value = Present Value Of Annuity $1Future Value
= 2.624 9, 000
$23, 616

Note:
Future value (FV)
Interest rate (I)
Time period (N)
Present value (PV)

$9.000
7%
3 years
$23.616

Calculate probability weighted present value of Customer List:

Calculate the probability weighted present value of Customer List by multiplying the
present value with the probability as below:

Approach 1
Approach 2
Approach 3
Total estimated value

Present value Probability Probability weighted

present value
$164,000
0.20
$32,800
$60,966
0.30
$18,290
$23,616
0.50
$11,808
$62,898

Journal entry:
Record the journal entry by debiting the customer list with the estimated value
computed above and credit the cash account as below:
Date

Account Title and Explanation

Debit $ Credit $
Customer list
$62,898
Cash
$62,898
[To record the entry for consumer list.]

2. Ongoing Research Project:

Outcome 1:
Present value of Annuity $1 for 5 years at the rate of 7% is 7.024 Calculate Present
value for Approach 1. It is calculated by multiplying Present value of Annuity $1 with
future value.
Present Value = Present Value Of Annuity $1Future Value
= 7.027 450, 000
$3,160,800

Future value (FV)

Interest rate (I)
Time period (N)

$450.000
7%
10 years

Present value (PV) $3.160.800

Outcome 2:
Present value of Annuity $1 for 4 years at the rate of 7% is 3.387 Calculate Present
value for Approach 1. It is calculated by multiplying Present value of Annuity $1 with
future value.
Present Value = Present Value Of Annuity $1Future Value
= 3.387 12, 000
$40, 644
Future value (FV)
Interest rate (I)
Time period (N)
Present value (PV)

$12.000
7%
4 years
$40.644

Outcome 3:
Present value of Annuity $1 for 3 years at the rate of 7% is 2.624 Calculate Present
value for Approach 1. It is calculated by multiplying Present value of Annuity $1 with
future value.
Present Value = Present Value Of Annuity $1Future Value
= 2.624 500
$1,312

Future value (FV)

Interest rate (I)
Time period (N)
Present value (PV)

$500
7%
3 years
$1.312

Calculate probability weighted present value of Ongoing Research Project:

To calculate the probability weighted present value of Customer List multiply present
value with the probability.

Approach 1
Approach 2
Approach 3
Total estimated value

Present Probability Probability weighted present

value
value
$3,160,800
0.10
$316,080
$40,644
0.20
$8,129
$1,312
0.70
$918
$325,127

Journal entry:
Date

Account Title and

Explanation
Ongoing Research Project
Cash
(To record the entry for
Ongoing Research Project)

Debit $ Credit $
$325,127
$325,127