Using the Indirect Method, Which of the Following Would Not

question 3

Multiple Choice

Using the indirect method, which of the following would not be an adjustment to net income?

• A) depreciation expense
• B) an increase in prepaid insurance
• C) an increase in inventories
• D) an increase in Land

Identify examples of black market transactions resulting from price controls.

Assess the implications of price controls on consumer and producer surplus.

Understand specific inefficiencies caused by binding price ceilings and floors, like persistent shortages and surpluses.

Identify the conditions under which price controls (ceilings and floors) are considered binding.

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Definitions:

Market Rate

The current price or interest rate at which goods, services, or financial instruments are traded in the open market.

Contract Rate

The agreed upon price for goods or services, often used in the context of interest rates on loans or fixed-income securities.

Carrying Value

The net amount at which an asset is valued on the balance sheet, calculated as the original cost minus accumulated depreciation and impairments.

Bond Payable

A long-term liability where a borrower agrees to pay the bondholder the principal plus interest on a specified date.