Capital Budgeting Methods Which Incorporate the Time Value of Money

question 25

Multiple Choice

Capital budgeting methods which incorporate the time value of money include the ________.

• A) net present value method
• B) accounting rate of return
• C) average rate of return
• D) payback method

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Definitions:

Unearned Rent

Income received in advance for rental periods that have not yet occurred, recognized as a liability until the service period is completed.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditure to the appropriate period.

Rent Revenue

Income earned from leasing out property or equipment to another party, reported as part of the operating income in the profit and loss statement.

Accrued Expense

An accounting record of an expense that has been incurred but not yet paid, representing a company's obligation to make future payments for goods and services received.