A Company Has Just Sold a Product with the Following

question 221

Multiple Choice

A company has just sold a product with the following payment plan: $75,000 today, $50,000 at the end of year 1, and $25,000 at the end of year two. If the payments
Are deposited into an account earning 4.5% per year, calculate the present value for the cash flow.

• A) $145,740
• B) $165,323
• C) $175,536
• D) $185,643
• E) $193,466

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Definitions:

Book Value

The net value of an asset or liability according to its balance sheet account balance, accounting for factors like depreciation.

Note Payable

A written promissory note in which one party agrees to pay another party a definite sum of money either on demand or at a specified future date.

Capital Account

This account records the investments made by owners or shareholders into a company, along with retained earnings and accumulated other comprehensive income.

Capital Balances

The amount of money that partners or owners have invested in a business, often reflected in the equity section of the balance sheet.