The Income Statement for the Month of June, 2011 of Taylor

question 78

Multiple Choice

The income statement for the month of June, 2011 of Taylor Enterprises contains the following information: $\begin{array}{lr}\text { Revenues }&&£7,000\\\text { Expenses: }\\\text { Wages Expense } & £ 2,000 \\\text { Rent Expense } & 1,000 \\\text { Supplies Expense } & 300 \\\text { Advertising Expense } & 200 \\\text { Insurance Expense } & 100\\\text { Total expenses }&&3,600\\\text { Net income (loss) }&&£(3,400) \end{array}$
The entry to close the expense accounts includes a

• A) debit to Income Summary for \( £ 3,400 \).
• B) credit to Rent Expense for \( £ 1,000 \),
• C) credit to Income Summary for \( £ 3,600 \).
• D) debit to Wages Expense for \( £ 2,000 \).

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Definitions:

NPV

Net Present Value, a method used to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows.

IRR

Internal Rate of Return; the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Time Value of Money

The concept that money available now is worth more than the same amount in the future due to its potential earning capacity.

Payback Period

The length of time it takes for an investment to generate cash flows sufficient to recover the initial investment cost.