Question

4 years ago, AB tools had an extra $500 it did not currently need so the firm deposited the 500 in a new savings account. 3 years ago, the firm withdrew 200. Last year, the firm deposited 800 into the account. Today, the account is worth 1,180 and the firm is withdrawing the entire balance. Which statement correctly defines a portion of the timeline for AB tools if the 500 deposit is shown at time zero?

a. At year one, there is a cash inflow of 200
b. At year four, there is a cash outflow of 1,180
c. At time zero, there is a cash inflow of 500
d. At year 2, there is a cash outflow of 800

Answer 1

The correct statement defining a portion of the timeline for AB tools is: At year four, there is a cash outflow of $1,180.

Step-by-step explanation:

The timeline for AB tools can be summarized as follows:

1. At year zero (time zero), there is a cash inflow of $500, represented by the initial deposit into the savings account.
2. At year one, there is no specific information given about a cash inflow or outflow of $200, so option (a) is incorrect.
3. At year two, there is no specific information given about a cash outflow of $800, so option (d) is incorrect.
4. At year three, there is a cash outflow of $200, represented by the withdrawal from the account.
5. At year four, there is a cash outflow of $1,180, represented by the withdrawal of the entire balance from the account.

Therefore, the correct statement defining a portion of the timeline is option (b): At year four, there is a cash outflow of $1,180.