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3 years ago

What criteria do accountants use to decide whether to use present or future values in accounting statements?

Business

1 answer:

Airida [17]3 years ago

5 0

Answer:

Present value is nothing but how much future sum of money worth today. It is one of the important concepts in finance and it is a basis for stock pricing, bond pricing, financial modeling, banking, and insurance, etc. Present value provides us with an estimated amount to be spent today to have an investment worth a certain amount of money at a specific point in the future. Present value is also called a discounted value. It is an indicator for investors that whatever money he will receive today can earn a return in the future. With the help of present value, method investors calculate the present value of a firm’s expected cash flow to decide if a stock is worth to invest today or not.

The formula for calculating PV is shown below

PV = CF/ (1+r)n

Here ‘CF’ is future cash flow, ‘r’ is a discounted rate of return and ‘n’ is the number of periods or year.

Example

Let’s say that you have been promised by someone that he will give you 10,000.00 Rs 5 year from today and interest rate is 8% so no we want to know what the present value of 10,000.00 Rs which you will receive in future so,

PV = 10,000/ (1+0.08)5

PV = 6805.83 (To the nearest Decimal)

So present-day value of Rs 10,000.00 is Rs 6805.83

Explanation:

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A higher required reserve ratio _________ the value of the simple deposit multiplier.

Sergio [31]

The answer to this question is decreases
required reserve ratio refers to a certain amount of depositors' money that the banks need to have available on their hand.
simple deposit multiplier. refers to the amount of money that the bank does not hold as excess reserve.
When the amount of cash that need to be held is lower, the amount of excess will also tend to be lower

3 0

4 years ago

On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $85,050 in assets in exchange for i

hoa [83]

Answer:

$3,260

Explanation:

Preparation of December statement of cash flows for Ernst Consulting

ERNST CONSULTING Income Statement

For Month Ended October 31

REVENUES

Consulting fees earned $17,450

Total revenues $17,450

EXPENSES

Rent expense $4,530

Salaries expense $8,090

Telephone expense $880

Miscellaneous expenses $690

Total expenses $14,190

Net income $3,260

($17,450-$14,190)

Therefore December statement of cash flows for Ernst Consulting will be $3,260

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3 years ago

Straight-Line Depreciation Irons Delivery Inc. purchased a new delivery truck for $42,000 on January 1, 2019. The truck is expec

Ket [755]

Answer:

Annual depreciation= $7,996

Explanation:

Giving the following information:

Purchase price= $42,000

Useful life= 5 years

Salvage value= $2,020

To calculate the annual depreciation under the straight-line method, we need to use the following formula:

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (42,000 - 2,020) / 5

Annual depreciation= $7,996

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3 years ago

What is meant by market in the lower-of-cost-or-market rule?

Pavel [41]

Answer:

Stock is valued at lower of : cost or market price [prudence principle]

Explanation :

Prudence or Conservatism is an accounting principle : anticipating for all possible losses & expenditures, not anticipating for possible profits & gains. This makes business better prepared to face all contingent expenditures/ losses.

This concept's implication is that : Stock or Inventory is valued at the value whichever is lesser between 'cost of inventory' & sale price. This makes inventory valuation as per the above explained Prudence/ Conservatism principle.

7 0

3 years ago

Jill invests $1,000.00 to buy ten shares of Good Corporation. The corporation goes bankrupt having no assets and $1 million in l

likoan [24]

Answer:

A. Limited liability.

Explanation:

The limited Liabilities company's protects their members and managers.

It protects their personal assets from the business liabilities.

The laiblities of the business will be settle with the busieness assets. IF there are no more assets, then debts defaults and become uncollectible.

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3 years ago