A Prepayment Is Considered to Be

question 4

Multiple Choice

A prepayment is considered to be:

• A) An asset which will be consumed in a future period
• B) An expense in the current year
• C) A future liability
• D) An expense incurred in one year but paid for in the following

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Definitions:

Initial Cost

The initial expenditure required to acquire an asset or to start a project, incorporating all necessary expenses to bring it to a usable state.

Net Present Value

This signifies the net difference in present value terms of cash received versus cash paid out over an outlined time interval.

Internal Rate of Return

The discount rate at which the net present value of all cash flows (both positive and negative) from a project or investment equals zero.

Decision Rule

A guideline or criterion that aids in making choices between alternative courses of action.