Better Buy Has Six CD Players in Inventory on December

question 17

Multiple Choice

Better Buy has six CD players in inventory on December 31.The players were purchased in November for $170.Price lists from Better Buy's supplier indicate that the same CD player would now cost the company $175.The current sales price for each of the CD players is $320.What would be the amount reported as Inventory on the balance sheet?

• A) $1,050
• B) $1,035
• C) $1,020
• D) $1,920

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Definitions:

Discount Rate

In discounted cash flow analysis, the discount rate is the interest rate utilized to ascertain the present value of future cash flows.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project, by calculating the difference between the present value of cash inflows and outflows over a period of time.

Salvage Value

The predicted price that an asset will fetch when it is sold at the conclusion of its usable life.

Working Capital

The difference between a company's current assets and current liabilities, representing the liquidity available to run its operations.