Use the Information Given Below to Answer the Following Questions

question 20

Multiple Choice

Use the information given below to answer the following questions:
LPR is a company that commenced business on 1 January 2012. Below are the balances in the 30 June 2012 financial statements.
$$\begin{array} { l r } &\$\\\text { Cash } & 2000 \\\text { Share capital } & 12000 \\\text { Accounts receivable } & 6000 \\\text { Accounts payable } & 4000 \\\text { Loan payable } & 14000 \\\text { Land } & 20000 \\\text { Inventory } & 4000 \\\text { Cost of goods sold } & 3000 \\\text { Wages expense } & 5000 \\\text { Sales } & 10000\end{array}$$

-What is the net profit for the period ending 30 June 2012?

• A) $7000
• B) $2000
• C) $4000
• D) $2000.

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return or discount rate.

Discounting

The process of determining the present value of future cash flows by applying a discount rate.

Compounding

The process in which the value of an investment increases because the earnings on an investment, both capital, and interest, earn interest as time passes.

Simple Interest

Interest calculated only on the principal amount of a loan or deposit, without compounding.