Judy Is Considering Receiving Either $20,000 of Current Salary or $40,000

question 3

Multiple Choice

Judy is considering receiving either $20,000 of current salary or $40,000 of deferred compensation in 12 years.Her current tax rate is 33%,but she expects her tax rate to be 15% 12 years from now.Judy can invest any after-tax current salary at a 6% ATROR.If she receives the deferred compensation,her investment will accumulate to

• A)$26,800.
• B)$34,000.
• C)$36,000.
• D)$40,000.

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Definitions:

Carrying Value

The book value of an asset on a balance sheet, representing its acquisition cost minus depreciation or amortization.

Ending Inventory

The value or quantity of stock and materials a company has at the end of a financial period.

Finished Goods

Products that have completed the manufacturing process but have not yet been sold or distributed to the end customer.

Absorption Costing

An accounting method that includes all manufacturing costs, both fixed and variable, in the cost of a product.