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F2 Chapter 22 Questions

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stavroula4says

Hi Sir. I don’t understand the last question 5. After checked also the lecture the example on the lectures is quite different from this one. but I don’t understand why in the end we put plus 6,000. I saw that already another one person asked this but still can not understand.

Using 1/r to discount a perpetuity assumes always that the first flow is in 1 years time.

So multiplying by 1/r gives the present value of the cash flows from 1 to infinity.

However this question also has a cash flow immediately (i.e. time 0).

So in addition to the PV of the flows from 1 to infinity we need to add on the PV of the cash flow immediately (time 0) and the PV of a cash flow now is the same as the cash flow.

Your lectures have been really helpful I must say.Thank you. However I don’t understand how you arrived at your answer in question 3. Why did you deduct 1 again from the answer?

Yes for sure and very thanks for that…… your lectures helps a lot. I passed my f3 by 66 although I completely left One 15 mark Question and Another 15 mark question in section B was also left incomplete by me due to Time Constraint….. Your lectures helped me a lot in passing my f3 exam….

Hi John, Could you explain question 2 please? In the question it says that it will be receivable for 8 years in total and that the first receipt isn’t received until the 3rd year. The answer however states that the final receipt is in 10 years time. Is it because we leave out 2 years that we account for 10 years then?

If it was receivable for 2 years in total, then it would be at time 3 and time 4 If it was receivable for 3 years in total, then it would be at times 3, 4 and 5.

Keep counting, and if it is receivable for 8 years in total then the last receipt will be at time 10.

Thank you, that’s exactly what I wasn’t sure of. Had to re-watch the lecture a couple of times but I still had my doubts so I had to ask even if it meant appearing stupid. This makes perfect sense now.

Sir please I need your help, how can a favourable price variance lead to the cause of inferior quality of the materials, because I think that things of higher quality results in higher price which will make the actual price been higher than the standard/budgeted which is then making the statement favourable. Thanks in Advance.

stavroula4 says

Hi Sir. I don’t understand the last question 5. After checked also the lecture the example on the lectures is quite different from this one. but I don’t understand why in the end we put plus 6,000. I saw that already another one person asked this but still can not understand.

John Moffat says

Using 1/r to discount a perpetuity assumes always that the first flow is in 1 years time.

So multiplying by 1/r gives the present value of the cash flows from 1 to infinity.

However this question also has a cash flow immediately (i.e. time 0).

So in addition to the PV of the flows from 1 to infinity we need to add on the PV of the cash flow immediately (time 0) and the PV of a cash flow now is the same as the cash flow.

stavroula4 says

Now, I understand. thank you very much

John Moffat says

You are welcome 馃檪

ojendress says

Hi there,

Your lectures have been really helpful I must say.Thank you. However I don’t understand how you arrived at your answer in question 3. Why did you deduct 1 again from the answer?

John Moffat says

Because 1 + annual rate = (1 + monthly rate) ^12

I do actually explain this in the lecture.

ojendress says

Had to watch the lecture again. Now I understand. Thank you!!!

John Moffat says

You are welcome 馃檪

Hussain says

Sir, Can u please explain question 5 of chapter 22 practise question……

According to me aanswer should 63158 but actual answer is 6000 more,. Can u please explain logic behind it….

John Moffat says

63158 is the result of multiplying by 1/r and gives the present value of a perpetuity that starts in 1 years time.

In this question, the first 6000 is received immediately, and the PV of 6,000 received now is 6,000. So this needs adding to the PV of the perpetuity.

(Have you watched the free lecture on annuities and perpetuities?)

Hussain says

Yes ofcourse I have watched lectures but in lectures there was no question like that……..

John Moffat says

But I make it very clear that multiplying by 1/r discounts a perpetuity starting in 1 years time 馃檪

Hussain says

Yes for sure and very thanks for that…… your lectures helps a lot. I passed my f3 by 66 although I completely left One 15 mark Question and Another 15 mark question in section B was also left incomplete by me due to Time Constraint….. Your lectures helped me a lot in passing my f3 exam….

kisukes says

Hi John, Could you explain question 2 please? In the question it says that it will be receivable for 8 years in total and that the first receipt isn’t received until the 3rd year. The answer however states that the final receipt is in 10 years time. Is it because we leave out 2 years that we account for 10 years then?

John Moffat says

The first receipt is in 3 years time.

If it was receivable for 2 years in total, then it would be at time 3 and time 4

If it was receivable for 3 years in total, then it would be at times 3, 4 and 5.

Keep counting, and if it is receivable for 8 years in total then the last receipt will be at time 10.

kisukes says

Thank you, that’s exactly what I wasn’t sure of. Had to re-watch the lecture a couple of times but I still had my doubts so I had to ask even if it meant appearing stupid. This makes perfect sense now.

John Moffat says

You are welcome 馃檪

marken says

Hi John, Could you please explain question 3 as I got confused on how to get to the answer.

Thanks

John Moffat says

1.5% per month is 0.015

There are 12 months in a year

So 1 + yearly rate = (1 + 0.015)^12

Have you watched the free lecture, because I explain this in the lecture?

jamespong says

for the fixed overhead expenditure

occur an adverse if the actual is greater than bugeted

is it correct?

umaryasin9 says

Or is it because is a material price variance. ok get it right.

John Moffat says

Yes – it is because it is a favourable material price variance (so they are paying less for the material) 馃檪

umaryasin9 says

Sir please I need your help, how can a favourable price variance lead to the cause of inferior quality of the materials, because I think that things of higher quality results in higher price which will make the actual price been higher than the standard/budgeted which is then making the statement favourable. Thanks in Advance.