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 tax planning strategies is based on the present value of money?

Accelerating the recognition of income

Spreading income evenly across all periods

Deferring income to future periods

Maximizing current period deductions

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Verified step by step guidance

Understand the concept of the present value of money: The present value of money is based on the idea that money received today is worth more than the same amount received in the future due to its earning potential (e.g., interest or investment returns). Tax planning strategies often leverage this principle.

Analyze the tax planning strategies provided: Each strategy has implications for when income or deductions are recognized, which affects the timing of tax payments and the present value of money.

Evaluate 'Accelerating the recognition of income': This strategy involves recognizing income earlier, which may increase current tax liability and reduce the benefit of deferring taxes to future periods. It does not align with the principle of maximizing the present value of money.

Evaluate 'Spreading income evenly across all periods': This strategy aims to smooth income recognition to avoid spikes in tax liability. While it may have benefits, it does not specifically leverage the present value of money principle.

Evaluate 'Deferring income to future periods' and 'Maximizing current period deductions': Deferring income to future periods reduces current tax liability, allowing the taxpayer to retain money longer and benefit from its earning potential. Similarly, maximizing current deductions reduces taxable income now, preserving cash flow for investment or other uses. Both strategies align with the present value of money principle, but deferring income is the most direct application.