Nevins Distributors Inc. is a wholesaler of oriental rugs. The following is a luncheon conversation between Pat

Question:

Nevin’s Distributors Inc. is a wholesaler of oriental rugs. The following is a luncheon conversation between Pat Cameron, the assistant controller, and Cindy Bakke, an assistant financial analyst for Nevin’s.
Cindy: Pat, do you mind if I spoil your lunch and ask you an accounting question?
Pat: No, go ahead. This chicken salad sandwich is pretty bad. It smells like it’s three days old, and I’ve already picked three bones out of it.
Cindy: Well, as you know, in finance we use present values for analysis, assessing financing alternatives, etc. It’s probably the most important concept that I learned in school that I actually use.
Pat: So . . . ?
Cindy: I was just wondering why accountants don’t use present values more.
Pat: What do you mean?
Cindy: Well, it seems to me that you ought to value all the liabilities at their present values.
How would you respond if you were Pat?

Balance Sheet
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