The FASB Concepts Statement Relating to Cash Flow Information Introduces

question 129

Essay

The FASB concepts statement relating to cash flow information introduces the concept of expected cash flows
when using present values for accounting measurements. Assume that Smith Company determined that it has a 40%
probability of receiving $10,000 one year from now and a 60% probability of receiving $10,000 two years from now.
Required:
Using the FASB concepts, calculate the present value of the expected cash flows assuming a 12% interest rate compounded annually.

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Definitions:

Facial Expressions

The movements of the muscles beneath the skin of the face that convey emotions and feelings to others.

Rancid

used to describe fats or oils that have spoiled or degraded, often characterized by a foul smell or taste.

Disgust

An intense emotional response of revulsion or profound disapproval, often triggered by unpleasant smells, tastes, sights, or ideas.

Native Speech

The language that a person has been exposed to from birth or within the critical period for language learning.