Wilma Has a $25,000 Certificate of Deposit (CD)at the Local

question 115

Multiple Choice

Wilma has a $25,000 certificate of deposit (CD) at the local bank. The interest on this certificate, $1,000, was credited to her account this year, but she must pay an early withdrawal penalty if she cashes in the CD before next year. Which of the following is a true statement?

• A)Wilma must include the $1,000 of interest in her income this year.
• B)Wilma must include the $1,000 of interest in her income when she cashes the CD.
• C)Wilma must include the $1,000 of interest in her income this year only if the bank waives the early withdrawal penalty.
• D)Wilma must include the $1,000 of interest in her income next year if she does not pay the early withdrawal penalty.
• E)All of the choices are correct.

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Definitions:

Additional Working Capital

Extra funds a company needs to support its normal business operations and accommodate growth.

Full Recovery

The process of recouping all costs incurred during production, often through sales revenue.

Net Present Value

A financial metric showing the value of all future cash flows related to an investment discounted back to the present time.

Capital Expenditure

Funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment.