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

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

Financial Accounting

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

If a project has multiple internal rates of return (IRRs), which of the following methods should be used to evaluate the project's profitability?

Modified Internal Rate of Return (MIRR) method

Net Present Value (NPV) method

Accounting Rate of Return (ARR) method

Payback Period method

Previous problemNext problem

Verified step by step guidance

Understand the concept of Internal Rate of Return (IRR): IRR is the discount rate at which the net present value (NPV) of cash flows equals zero. Multiple IRRs can occur when a project's cash flows change direction (e.g., from positive to negative) more than once.

Recognize the limitation of IRR: When there are multiple IRRs, it becomes difficult to determine the project's profitability using IRR alone, as it can lead to conflicting results.

Learn about the Net Present Value (NPV) method: NPV calculates the present value of all cash inflows and outflows using a single discount rate (usually the cost of capital). It provides a clear measure of profitability by showing the net value created by the project.

Compare NPV to other methods: While methods like Modified Internal Rate of Return (MIRR), Accounting Rate of Return (ARR), and Payback Period have their uses, NPV is considered the most reliable method for evaluating profitability, especially when IRR is ambiguous.

Conclude that the NPV method should be used: Since NPV avoids the issue of multiple IRRs and directly measures the value added by the project, it is the preferred method for evaluating profitability in this scenario.