TITLE

THINK LIKE AN ACCOUNTANT

Chapter 2

COLLEGE

The College worksheet contains a schedule that calculates the annual return on investment for a college fund. For each year,
the annual contribution and the annual return on the investment is used to calculate a new ending value. The chart illustrates
how the annual return on investments accelerates over time.

STEPS 1

Read all of the steps before working with this workbook.

Click the Analysis worksheet tab to view the template.

Key your name in cell C2.

Enter the appropriate data in cells denoted by a question mark (?).

Use the schedule to answer question (1).

Modify the schedule to determine the amounts necessary to reach the stated goals:

Follow steps 7-14 to answer questions (2) and (3).

On the Data tab in the Data Tools group, select What-If Analysis and Goal Seek.

In the Goal Seek window, for the Set cell box, select the cell from the analysis containing the Ending Balance for Year 18.

For the Set cell box, select the cell from the analysis containing the Ending Balance for Year 18.

###

For the To value box, enter the goal amount (do not include dollar signs or commas).

###

For the By changing cell box, select the cell from the analysis containing the amount to be changed (the annual contribution).

###

Click OK.

###

Use the schedule to answer the questions.

RETIREMENT

The Retirement worksheet resembles the College worksheet. The schedule calculates the annual return on investment for a
retirement fund for a single annual investment between a starting and ending age. The longer period of time in this worksheet
provides a more dynamic illustration of how investments grow over time.

STEPS 1

Enter the appropriate data in cells denoted by a question mark (?).

Use Goal Seek to determine the annual contribution necessary to answer each question.

Print the worksheet solution for each question, as instructed by your teacher.

Save your work and submit the saved Excel File on Edmodo.

Problem Number:
Student's Name:

Think Like an Accountant, Chapter 2

ning

Annual Contribution
Total Investment
Annual Rate of Return
Beginning
Balance

Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18

$
$

4,265
8,544
13,081
17,889
22,986
28,388
34,115
40,186
46,620
53,441
60,671
68,335
76,459
85,070
94,197
103,873
114,129

4,024
72,424
6.0%

Annual
Annual Return
Ending Balance
Contribution
on Investment
$
4,024 $
241 $
4,265
4,024
256
8,544
4,024
513
13,081
4,024
785
17,889
4,024
1,073
22,986
4,024
1,379
28,388
4,024
1,703
34,115
4,024
2,047
40,186
4,024
2,411
46,620
4,024
2,797
53,441
4,024
3,206
60,671
4,024
3,640
68,335
4,024
4,100
76,459
4,024
4,588
85,070
4,024
5,104
94,197
4,024
5,652
103,873
4,024
6,232
114,129
4,024
6,848
125,000

Annual Additions to Fund

$12,000
$10,000
$8,000
$6,000
$4,000

Annual Return on
Investment

$2,000

Annual Contribution

$0
Year

1 Yes, enough
2
3,219
3
4,024

Problem Number:
Student's Name:

Think Like an Accountant, Chapter 2

ning

Annual Contribution
Annual Rate of Return
Contributions Begin at Age
Contributions End at Age
Total Contributions

43,478
6.0%
43
65
1,000,000

Ending Balance by Age

Age
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70

Beginning Balance
46,087
94,939
146,722
201,613
259,796
321,471
386,846
456,144
529,600
607,463
689,997
777,484
870,220
968,520
1,072,719
1,183,169
1,300,246
1,424,347
1,555,895
1,695,336
1,843,143
1,999,819
1,000,000
1,060,000
1,123,600
1,191,016
1,262,477

Annual
Annual Return
Ending Balance
Contribution
on Investment
$
$
$
43,478
2,609
46,087
43,478
5,374
94,939
43,478
8,305
146,722
43,478
11,412
201,613
43,478
14,705
259,796
43,478
18,196
321,471
43,478
21,897
386,846
43,478
25,819
456,144
43,478
29,977
529,600
43,478
34,385
607,463
43,478
39,056
689,997
43,478
44,009
777,484
43,478
49,258
870,220
43,478
54,822
968,520
43,478
60,720
1,072,719
43,478
66,972
1,183,169
43,478
73,599
1,300,246
43,478
80,623
1,424,347
43,478
88,070
1,555,895
43,478
95,962
1,695,336
43,478
104,329
1,843,143
43,478
113,197
1,999,819
43,478
122,598
1,000,000
60,000
1,060,000
63,600
1,123,600
67,416
1,191,016
71,461
1,262,477
75,749
1,338,226

4
24,390
5
43,478
6 Reflective Q What advice would you give to a friend about saving for a pension?
You should find a bank that give you high interest rate because it will take you less to wait for the higher amount of money, and it can help you decrease the annual contribution.