The FASB concepts statement relating to cash flow information introduces the concept of expected cash flows when using present values for accounting measurements. Assume that Smith Company determined that it has a 40% probability of receiving $10,000 one year from now and a 60% probability of receiving $10,000 two years from now.
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Required:
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Using the FASB concepts, calculate the present value of the expected cash flows assuming a 12% interest rate compounded annually.
What will be an ideal response?
Present value of a single sum using probabilities, table approach:??
| PV | = (FV× Factor for Pn = 1, i = 12%× 40%) + (FV× Factor for Pn = 2, i = 12%× 60%) |
| = ($10,000 × 0.892857 × 40%) + ($10,000 × 0.797194 × 60%) | |
| = $3,571.43 + $4,783.16 | |
| = $8,354.59 |
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A. 
B. FV× (1 + i)n
C. 
D. 
Decide whether the statement makes sense. Explain your reasoning.Apartments in a new building can either be bought or rented. Gale calculated that it would be cheaper for her to buy. Gale's brother did the same calculations for himself for the same apartment and found that it would be cheaper to rent.
What will be an ideal response?
Choose the equation that matches the graph. 
A. x - 3 = 0 B. y + 3 = 0 C. y - 3 = 0 D. x + 3 = 0
Find the exact value of the expression.
A. -
B. - 
C. - 
D. -2