A Lorenz Curve Showing the Current Distribution of Pre-Tax Income

question 61

Multiple Choice

A Lorenz curve showing the current distribution of pre-tax income in Canada is not an entirely accurate depiction of Canadian income distribution because

• A)Statistics Canada does not actually collect data on Canadian household income.
• B)Canada's tax-and-transfer system reduces income inequality,which causes the Lorenz curve to be flatter and closer to the diagonal than the pre-tax curve.
• C)the data collected on Canadian income distribution does not allow for an accurate plotting of a Lorenz curve.
• D)a Lorenz curve cannot depict the distribution of income after government transfer payments have been distributed to households.
• E)a Lorenz curve cannot depict the distribution of after-tax income.

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Definitions:

Uncollectibles

Debts owed to a company that are considered unlikely to be recovered or paid.

Aging of Receivables

The process of categorizing accounts receivable by their due dates to estimate bad debt expenses.

Allowance Account

An account used to offset the total amount of accounts receivable due to the likelihood that some accounts will not be collected.