The time value of money and present value are important business concepts. Required: Differentiate between the concepts discounting and compounding.
What will be an ideal response?
Discounting refers to the mathematical process whereby we calculate the present value of a future amount. Compounding refers to the mathematical process whereby we calculate the future value of a present amount.
Both terms recognize that a dollar received today is worth more than a dollar received in the future. The end result of the calculations will depend on the length of time of the investment and the interest rate used.
You might also like to view...
The satisfactory development of a relationship depends on the ______.
Fill in the blank(s) with the appropriate word(s).
Which type of bad leader only cares about her/his immediate followers?
A. callous B. insular C. rigid D. evil
Financial statement notes must disclose significant limitations on dividend declarations
Indicate whether the statement is true or false
Aronson & Associates LLP Aronson & Associates LLP, an accounting firm, assigns overhead to clients based on direct labor hours. The following information is available for the month of March: Estimated direct labor hours 8,000 hours Estimated overhead costs $16,000 Actual direct labor hours 8,100 hours Actual overhead costs $16,190 Refer to the Aronson & Associates LLP information above. By how
much was overhead over- or underapplied for the month of March? A) $10 overapplied B) $190 overapplied C) $10 underapplied D) $190 underapplied