Suppose the Current Account of a Country Is in Balance

question 13

Multiple Choice

Suppose the current account of a country is in balance and the official settlements account equals zero. A new transaction occurs so that the current account is now in surplus, but the official settlements account does not change. From this we know that

• A) the balance of trade is now in surplus.
• B) the government is running a budget deficit.
• C) the capital and financial account is now in deficit.
• D) the government must make official reserve transactions.

Calculate and record transactions related to notes receivable, including interest calculations and dishonored notes.

Understand and apply the percent of sales method for estimating bad debts.

Record entries related to credit card sales and the impact of service charges on these transactions.

Describe the methods used to convert receivables to cash before maturity and discuss their accounting implications.

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Definitions:

Recognized Gross Profit

Gross profit that has been realized and reported in the financial statements of a company, calculated as sales revenue minus the cost of goods sold.

Periodic Cash Proceeds

Periodic cash proceeds refer to the regular amounts of money received by a business over a specified period, such as from sales or investments.

Market Price Method

A valuation method for inventory or assets based on current market prices.

Net Income

Net income is the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.