Based on the concepts covered in this chapter, think about the following scenari

Question

Based on the concepts covered in this chapter, think about the following scenario: One company is considering if it should take a new project and hired a consulting firm for input. After the meeting, the company received and paid a bill from the consulting firm. Is the paid consulting fee an incremental cash flow to the new project?

a.) Yes, because the service was provided.

b.) No, because it occurred regardless if the firm accepts the project.

c.) Yes, because the company spent money on it.

d.) No, because the cost was from the past.

Explanation / Answer

option a is correct.

Because, it thinks that accepting the project gives benefits to it, and it accepted the project.

Later appointed a third party to complete the project, and it was performed it. Means the third party completed the project.

So, for the completion of the work the company received payment from the work provider. Similar way, as appointed third party to complete the task, it paid to the third party.

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