The Present Value of £2,000 to Be Received Three Years

question 5

Multiple Choice

The present value of £2,000 to be received three years from now and earning a 12 per cent return is

• A)£1,424.
• B)£1,760.
• C)£2,440.
• D)£2,720.

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Definitions:

Closing Entry

An accounting action that transfers the balances from temporary accounts to permanent ones at the end of an accounting period.

Owner's Equity

The residual interest in the assets of an enterprise after deducting its liabilities; represents the owner's claims against the company's assets.

Income Summary

An account to which the revenues and expenses are transferred in order to calculate the net income for the period, ultimately transferring to retained earnings.

Accounting Cycle

The series of steps followed by an entity to collect, process, and report financial information, culminating in the preparation of financial statements for a specific period.