A Price Relative Was Computed for Houses

question 35

Multiple Choice

A price relative was computed for houses. The base period is 2005. The price relative in 2010 was 130. The interpretation of the price relative is that

• A)there has been a 130% increase in the price of houses from 2005 to 2010.
• B)there has been a 30% increase in the price of houses from 2005 to 2010.
• C)the price of houses in 2010 was $130 higher than the price in 2005.
• D)It is impossible to interpret the index.

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Definitions:

Aging Method

An accounting technique used to estimate uncollectible accounts receivable based on the age of each account's outstanding invoices.

Direct Write-off

The Direct Write-off method is an accounting procedure where uncollectible debts from customers are directly written off against income at the time they are deemed uncollectible.

Bad Debts Recovered

Amounts previously written off as uncollectible but later received or recovered, leading to an adjustment in the financial statements.

Accounts Receivable

Outstanding payments from customers to a business for delivered goods or services awaiting settlement.