You Have Some Property for Sale and Have Received Two

question 314

Multiple Choice

You have some property for sale and have received two offers. The first offer is for $189,000 today in cash. The second offer is the payment of $100,000 today and an additional $100,000 two years from today. If the applicable discount rate is 8.75%, which offer should you accept and why?

• A) You should accept the $189,000 today because it has the higher present value.
• B) You should accept the $189,000 today because it has the lower future value.
• C) You should accept the second offer because you will receive $200,000 total.
• D) You should accept the second offer because you will receive an extra $11,000.
• E) You should accept the second offer because it has a present value of $194,555.42.

Learn the steps of the accounting cycle, including journalizing transactions, posting to the ledger, preparing trial balances (unadjusted, adjusted, and post-closing), and preparing financial statements.

Comprehend the process and importance of adjusting entries in the preparation of financial statements.

Recognize how and when to use reversing entries in the accounting process.

Identify and classify current and long-term assets and liabilities on the balance sheet.

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Definitions:

Machine-Hours

A measure of production volume that records the number of hours machinery is in operation.

Milling Department

A division within a manufacturing facility where material, such as metal or wood, is shaped and finished using milling machines.

Customizing Department

A specialized department or section within a company that is dedicated to modifying and adapting products to meet specific customer requirements or preferences.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated before a production period begins.