Essay
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.
Required:
Using the FASB concepts, calculate the present value of the expected cash flows assuming a 12% interest rate compounded annually.
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