CUSTOM COST ACCOUNTING 15E
15th Edition
ISBN: 9781269831338
Author: Horngren
Publisher: PEARSON C
expand_more
expand_more
format_list_bulleted
Concept explainers
Textbook Question
Chapter 21, Problem 21.1Q
“Capital budgeting has the same focus as accrual accounting.” Do you agree? Explain.
Expert Solution & Answer
To determine
Capital Budgeting:
It refers to the long term investment decisions that has been taken by the top management of a company and that are irreversible in nature. These decisions require investment of large amount of cash of the company.
To explain: Whether the given statement is correct or not.
Answer to Problem 21.1Q
The given statement is not correct.
Explanation of Solution
- Accrual accounting focuses on the transactions in a particular accounting period while capital budgeting considers the cash flows throughout the life of the asset.
- Therefore, this statement is false that capital budgeting and accrual accounting has same focus.
Conclusion
Thus, the given statement is not correct.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
In most capital budgeting decisions, the emphasis should be on reported earnings rather than cash flows
In the context of capital budgeting, what is meant by the word “discounting”?
Use an example to explain to show why capital budgeting relies on cash flows rather than net income?
Chapter 21 Solutions
CUSTOM COST ACCOUNTING 15E
Ch. 21 - Capital budgeting has the same focus as accrual...Ch. 21 - List and briefly describe each of the five stages...Ch. 21 - Prob. 21.3QCh. 21 - Only quantitative outcomes are relevant in capital...Ch. 21 - How can sensitivity analysis be incorporated in...Ch. 21 - Prob. 21.6QCh. 21 - Describe the accrual accounting rate-of-return...Ch. 21 - Prob. 21.8QCh. 21 - Lets be more practical. DCF is not the gospel....Ch. 21 - All overhead costs are relevant in NPV analysis....
Ch. 21 - Prob. 21.11QCh. 21 - Distinguish different categories of cash flows to...Ch. 21 - Prob. 21.13QCh. 21 - How can capital budgeting tools assist in...Ch. 21 - Distinguish the nominal rate of return from the...Ch. 21 - A company should accept for investment all...Ch. 21 - Prob. 21.17MCQCh. 21 - Which of the following statements is true if the...Ch. 21 - Prob. 21.19MCQCh. 21 - Nicks Enterprises has purchased a new machine tool...Ch. 21 - Prob. 21.21ECh. 21 - Capital budgeting methods, no income taxes. Yummy...Ch. 21 - Capital budgeting methods, no income taxes. City...Ch. 21 - Prob. 21.24ECh. 21 - Capital budgeting with uneven cash flows, no...Ch. 21 - Comparison of projects, no income taxes. (CMA,...Ch. 21 - Payback and NPV methods, no income taxes. (CMA,...Ch. 21 - DCF, accrual accounting rate of return, working...Ch. 21 - Prob. 21.29ECh. 21 - Prob. 21.30ECh. 21 - Project choice, taxes. Klein Dermatology is...Ch. 21 - Prob. 21.32ECh. 21 - Selling a plant, income taxes. (CMA, adapted) The...Ch. 21 - Prob. 21.36PCh. 21 - NPV and AARR, goal-congruence issues. Liam...Ch. 21 - Payback methods, even and uneven cash flows. Sage...Ch. 21 - Replacement of a machine, income taxes,...Ch. 21 - Recognizing cash flows for capital investment...Ch. 21 - NPV, inflation and taxes. Fancy Foods is...Ch. 21 - NPV of information system, income taxes. Saina...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- (1) What are the three types of risk that are relevant in capital budgeting? (2) How is each of these risk types measured, and how do they relate to one another? (3) How is each type of risk used in the capital budgeting process?arrow_forwardWhy are interest charges not deducted when a projects cash flows are calculated for use in a capital budgeting analysis?arrow_forwardWhat is meant by the term payback period? How is this criterion sometimes used in capital budgeting?arrow_forward
- What is the analytic hierarchy process (AHP), and how can it be used in making capital budgetingdecisions?arrow_forwardTrue or False In most capital budgeting decisions, the emphasis should be on reported earnings rather than cash flows.arrow_forwardCapital budgeting analysis is based onarrow_forward
- What basic capital budgeting technique(s) you would use to accurately assess cash flow when taxes are considered. Support the rationale.arrow_forwardWhich is one of the most important parts of the capital budgeting process? Explain with an example?arrow_forwardThe following are discounting techniques in capital budgeting, except? discounted payback accounting rate of return present value index modified internal rate of returnarrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License