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

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Multiple Choice

Which of the following processes can be used to calculate the future value of multiple cash flows?

Averaging the cash flows and multiplying by the number of periods

Subtracting each cash flow from the initial investment

Compounding each cash flow to its future value and then summing the results

Discounting each cash flow to its present value and then summing the results

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Verified step by step guidance

Understand the concept of future value: Future value (FV) is the value of a cash flow or series of cash flows at a specific point in the future, calculated using the process of compounding.

Recognize that compounding involves applying the formula for future value to each cash flow. The formula for future value is:

FV = PV \cdot (1 + r) (^{n)}

, where PV is the present value of the cash flow, r is the interest rate, and n is the number of periods.

Apply the formula to each individual cash flow in the series. For each cash flow, calculate its future value by substituting the respective values of PV, r, and n into the formula.

Sum the future values of all the individual cash flows to determine the total future value of the series of cash flows.

Avoid common misconceptions: Averaging the cash flows or subtracting them from the initial investment does not calculate future value. Discounting cash flows to their present value is used for present value calculations, not future value.