The Proposition That Discounted Future Amounts Are Equal to a Specific

question 52

Multiple Choice

The proposition that discounted future amounts are equal to a specific present amount is known as:

• A) the concept of equivalency.
• B) compounding.
• C) future value.
• D) capital budgeting.
• E) discounting.

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Definitions:

Uncollectible Receivables

Accounts receivable that a company does not expect to collect and writes off as a loss.

Credit Sales

Sales transactions where the payment is deferred to a future date, typically resulting in the creation of accounts receivable.

Allowance for Doubtful Accounts

An allowance for doubtful accounts is a contra-account that reduces the total receivables on the balance sheet by the amount that is estimated to be uncollectible.

Bad Debt Expense

The cost associated with accounts receivable that a company does not expect to collect because customers default on their payments.