The Price Index in the First Year Is 100, in the Second

question 134

Multiple Choice

The price index in the first year is 100, in the second year is 90, and in the third year is 80. What is the deflation rate between the first and second year, and between the second and third year?

• A) 11 percent between the first and second year, 11 percent between the second and third year
• B) 11 percent between the first and second year, 12 percent between the second and third year
• C) 10 percent between the first and second year, 11 percent between the second and third year
• D) 10 percent between the first and second year, 12 percent between the second and third year

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Definitions:

Allowance for Doubtful Accounts

An accounting provision made to accommodate possible unpaid debts or credit losses in a company's accounts receivable.

Debit Balance

An accounting entry that shows the amount owed or the total of transactions that have been charged to an account, typically indicating expenses or assets.

Aging the Accounts

The process of categorizing accounts receivables based on how long they have been outstanding.

Allowance for Doubtful Accounts

Allowance for doubtful accounts is a contra-account that reduces accounts receivable to reflect the amount of receivables that may not be collectible.