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3 years ago

Which capital budgeting method uses accrual accounting, rather than net cash inflows, as a basis for calculations?

Business

2 answers:

jeka943 years ago

7 0

Answer:

Accounting Rate of Return

Explanation:

Accounting Rate of Return is the capital budgeting method that uses accrual accounting, rather than net cash inflows, as a basis for calculations.

The Accounting rate of return (ARR) capital budgeting methodology and a financial ratio which takes no recognition of time value of money. It is calculated based on the net income of the capital investment(s) proposed.

In conclusion the reason why it is argued that the Accounting Rate of Return uses accrual accounting is because the net income from the investment which is used in its appraisal, is derived based on the accrual basis since <u>such net income is recognized when earned not when received</u>

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Anastaziya [24]3 years ago

4 0

Answer:

Annual rate of return method

Explanation:

Annual rate of return method unlike some other capital budgeting techniques uses a data that is consistent with accrual concepts. the income it uses is the estimated annual net income of the entity.

Below is the formula used for Annual rate of return method:

Annual rate of return = Estimated Annual net income/Average Investment.

It ignore the cash inflow.

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Mariota Corp. just paid a dividend of $4.30 per share on its stock. The dividend growth rate is expected to be 3.2 forever and i

noname [10]

Answer:

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3 years ago

Lester's just signed a contract that will provide the firm with annual cash inflows of $28,000, $35,000, and $42,000 over the ne

Free_Kalibri [48]

Answer:

$64,474.20

Explanation:

As for the information provided,

discount rate = 7.25%

First payment will be made at the end of year 1

Discounting factor = $\frac{1}{(1+0.0725)^1} = 0.9324$

Thus, current value of payment = $28,000 \times 0.9324$ = $26,107.20

Discounting factor for receipts =

Year 1 = $\frac{1}{(1+0.0725)^1} = 0.9324$ = $28,000 $\times$ 0.9324 = 26,107.20

Year 2 = $\frac{1}{(1+0.0725)^2} = 0.8694 = 35,000 \times 0.8694 = 30,429$

Year 3 = $\frac{1}{(1+ 0.0725)^3} = 0.8106 = 42,000 \times 0.8106 = 34,045.20$

Therefore, value of contract today = - $26,107.20 + $26,107.20 + $30,429.0 + $34,045.20 = $64,474.20

5 0

3 years ago

Which savings account can a financial institution end?

Elan Coil [88]

Callable Certificate of Deposit is a type of savings account that a financial institution can terminate.

6 0

4 years ago

A company's Cash account shows an ending balance of $4,200. Reconciling items included a bookkeeper error of $50 (a $550 check r

hoa [83]

Answer:

Adjusted book balance will be $4258

Explanation:

We have given ending book balance = $4200

Error in recording = $50

Interest revenue = $33

And service charge = $25

We have to find the adjusted book balance

Adjusted book balance is given by

Adjusted book balance = Ending book balance + error in recording + interest revenue - service charge = $4200+$50+$33-$25=$4258

6 0

3 years ago

In 2022 the Splish Brothers Inc. had net credit sales of $1020000. On January 1, 2022, the Allowance for Doubtful Accounts had a

zaharov [31]

Answer:

$35,300 (Credit)

Explanation:

Given that;

Allowance = 10% × $242,000 = $24,200

Amount written off of $34,200 would have made the balance in the allowance for doubtful debts

= $34,200 - $23,100

= $11,100 (Debit)

However, the balance in the account at the end of the year should amount to $24,200 hence the adjustment required

= $24,200 + $11,100

=$35,300 (Credit)

5 0

3 years ago