Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

Which of the following is a method commonly used to compute the time value of money?

LIFO Inventory Valuation

Present Value (PV) calculation

Double-Entry Bookkeeping

Straight-Line Depreciation

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Verified step by step guidance

Understand the concept of 'time value of money,' which refers to the idea that money available today is worth more than the same amount in the future due to its earning potential.

Identify the method commonly used to compute the time value of money. This involves calculating the Present Value (PV), which discounts future cash flows to their value today.

Learn the formula for Present Value (PV): \( PV = \frac{FV}{(1 + r)^n} \), where \( FV \) is the future value, \( r \) is the discount rate, and \( n \) is the number of periods.

Compare the other options provided in the question: LIFO Inventory Valuation, Double-Entry Bookkeeping, and Straight-Line Depreciation. These are unrelated to the computation of the time value of money and serve different purposes in accounting.

Conclude that Present Value (PV) calculation is the correct method for computing the time value of money, as it directly addresses the concept of discounting future cash flows to their present value.