Compare the Economic Values of Two Options Given an Annual

question 268

Multiple Choice

Compare the economic values of two options given an annual rate of 8.5%. Option 1 - $900 in 60 days and $1,200 in 180 days. Option 2 - $925 in 90 days and $1,050 in 120 days. Given the following information, choose the best option.

• A) Option 1 - benefit of $111.85
• B) Option 1 - benefit of $138.45
• C) No difference between options
• D) Option 2 - benefit of $111.85
• E) Option 2 - benefit of $138.45

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Definitions:

FOB Destination

A shipping term indicating that the seller retains ownership and responsibility for goods until they are delivered to the buyer’s location, at which point the buyer takes ownership.

Sale Recorded

The process of documenting a sale transaction in the financial books of a company, recognizing revenue.

Deposits in Transit

Funds that have been received and recorded by a company but not yet by its bank.

Bank Reconciliation

Process of verifying the accuracy of both the bank statement and the cash accounts of a business.