Scenario 15.5: Consider the Following Information Based on a Story by Hubert

question 89

Multiple Choice

Scenario 15.5:
Consider the following information based on a story by Hubert B. Herring that appeared in The New York Times on Catherine has a two-pack-a-day cigarette habit. Cigarettes cost about $2 per pack. Catherine is 20. On a $250,000 life insurance policy, her annual premiums are $1200; a non-smoker's would be $500. Smokers earn from 4 to 8 percent less in income than non-smokers (lower productivity and more absence, among other things) . In this case Catherine's income is expected to be $20,500 per year over her lifetime whereas $22,000 is an average non-smoker's salary. Let interest rates are expected to be 3%.
-Refer to Scenario 15.5. What formula shows the present value of the amount Catherine would save on cigarette purchases over her lifetime?

• A) $4 times 365 times 60
• B) $1460 (1 + 1/1.03 + 1/1.03² + 1/1.03³ + ... + 1/1.03⁶⁰)
• C) $1460 (1 + 1/1.03 + 1/1.03² + 1/1.03³ + ... + 1/1.03⁸⁰)
• D) $87,600 / (1 + 1.03 + 1.03² + ... + 1.03⁶⁰)
• E) $87,600 / (1 + 1.03 + 1.03² + ... + 1.03⁸⁰)

Account for investments with significant influence over the investee's management and operations.

Recognize the difference between creditor and owner securities in the context of investment classification.

Prepare necessary journal entries for transactions and events involving equity method investments.

Account for transactions involving stock investments with insignificant influence.

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Definitions:

Interpersonal Relationships

The connections and interactions between two or more people, which may be based on sentiments, love, solidarity, regular business interactions, or some other type of social commitment.

Two-factor Theory

Two-factor theory, also known as Herzberg's motivation-hygiene theory, posits that job satisfaction and dissatisfaction arise from two distinct sets of factors: motivators and hygiene factors.

Job Satisfaction

The level of contentment individuals feel with their job, including aspects like work responsibilities, environment, and compensation.

Interpersonal Relationships

Connections or associations between two or more people that can vary in duration and significance.