The Elimination Principle Illustrates the Idea That

question 85

Multiple Choice

The elimination principle illustrates the idea that:

• A) above-normal profits will be eliminated by decreases in demand due to high prices.
• B) losses will be eliminated by the innovation of new products.
• C) above-normal profits will be eliminated by the entry of new firms into the industry.
• D) losses will be eliminated by firms decreasing their costs.

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Definitions:

Current Assets

Holdings that are projected to be liquidated, traded, or used up within twelve months or over the course of the operating cycle, depending on which timeframe is more extended.

Current Liabilities

Financial obligations or debts that a company is expected to settle within one year or within its operating cycle.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts, preparing the books for the next period.

Depreciation Expense

This is an accounting method used to allocate the cost of a tangible asset over its useful life.