You Estimate That It Will Take Five Years to Complete

question 19

Multiple Choice

You estimate that it will take five years to complete your college education.Your parents want to invest enough money today at an interest rate of 8% compounded annually to allow you to withdraw $10,000 at the end of each year for the next five years,with nothing left at the end.The amount of money to invest today is:

• A)$14,690.
• B)$34,050.
• C)$39,930.
• D)$50,000.
• E)none of thesE.

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Definitions:

Adjusting Entries

Accounting adjustments used to ensure that revenue and expense recognition principles are followed accurately in the financial statements.

Reversing Entries

Optional accounting procedures that are used to cancel out adjusting entries of the previous accounting period in the new period.

Interest Expense

The cost incurred by an entity for borrowing funds, often reported on the income statement.

Closing Journal Entries

At the close of an accounting cycle, transactions are documented to move balances from provisional to fixed accounts.