I an Index Is a Convenient Way of Comparing Changes

question 12

Multiple Choice

i. An index is a convenient way of comparing changes for different variables, i.e., average income and food prices.
ii. The concept of real income is sometimes called deflated income.
iii. Purchasing power of the dollar is the same as the CPI.

• A) (i), (ii) and (iii) are all correct statements
• B) (i) and (ii) are correct statements, but not (iii).
• C) (i) and (iii) are correct statements but not (ii).
• D) (ii) and (iii) are correct statements but not (i).
• E) All statements are false

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Definitions:

Allowance Method

An accounting technique used to estimate and account for bad debts, allowing a company to anticipate and reduce accounts receivable to a more realistic value.

Accounts Receivable

Money owed to a business by its customers for goods or services delivered but not yet paid for.

Allowance for Doubtful Accounts

A contra-asset account designated to approximate the amount of a company's accounts receivable that is likely uncollectible.

Adjusting Entry

Journal entries made at the end of an accounting period to allocate income and expenses to the period in which they actually occurred.