Q2Q

Expert-verifiedFound in: Page 301

Book edition
16th

Author(s)
Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

Pages
1552 pages

ISBN
9781118743201

**Question:Identify three situations in which accounting measures are based on present values. Do these present value applications involve single sums or annuities, or both single sums and annuities? Explain.**

The situation in which present value measures are used in accounting includes:

Notes receivables and payable

Leases

Pensions and another deferred compensation arrangement

These involve the single sum transaction.

There are various situations in which accounting measures are based on present values.

Notes Receivables and Payables: It includes present value annuities, when there are periodic interest payments are involved.

Leases: It involves the measurement of assets and obligations which are usually based on the present value of annuities.

Pensions and another deferred compensation arrangement: It involves the discounted future annuity payments that are paid to the employees on their retirement.

The notes receivables and payables involve single sums and leases also involve single sums.

Single sums refer to that single amount of money that either exists now or will exist in the future.

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