Use the Information for the Question(s)below

question 99

Multiple Choice

Use the information for the question(s) below.
Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is five years. You can purchase a new delivery truck for an upfront cost of $250 000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $5 000 (paid at the end of each month) . Your firm can borrow at 5% APR with quarterly compounding.
-A 12% APR with bi-monthly compounding is equivalent to an EAR of

• A)12.50%.
• B)12.62%.
• C)12.00%.
• D)11.98%.

Apply the percentage-of-completion and completed contract methods for long-term construction contracts and evaluate their conservatism.

Grasp the complexities of accounting for contracts under IFRS when cost estimation is challenging.

Understand the installment method of revenue recognition and its impact on deferred and realized gross profit.

Familiarize with recent developments in revenue recognition standards and their implications on accounting practices.

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Definitions:

Account Balance

The total amount of money present in an account at a given point in time, considering all credits and debits.

Funds

Capital set aside for specific purposes or investments.

Present Value

Present value is a financial concept that represents the current value of a future amount of money or stream of cash flows, discounted at a specified rate of return.

Discount Rate

The interest rate used to discount future cash flows to their present value, often used in the valuation of investments.