Why Might a Company Use Barter Rather Than Money to Make

question 220

Multiple Choice

Why might a company use barter rather than money to make a trade?

• A) Barter trade is generally more efficient than money-based trade.
• B) Barter can enable two firms to trade when their cash flows are limited.
• C) Money requires a coincidence of wants; barter is more direct.
• D) Money is efficient only for large transactions, so barter is preferred for smaller transactions.

Describe the purchasing and sales transaction recording processes in a perpetual inventory system.

Understand the closing entries process for merchandising companies.

Explain inventory shrinkage and its accounting treatment.

Understand how to analyze the liquidity of a company through comparative financial information.

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Definitions:

Aggregate Demand

The total demand for all goods and services within a particular market.

Wealth Effect

The wealth effect is the change in consumer spending and economic behavior resulting from changes in perceived wealth, typically due to asset price variations.

Aggregate-Demand Curve

A curve that represents the total demand for all goods and services in an economy at various price levels.

Liquidity Preference Theory

is the hypothesis that investors prefer to have liquid rather than illiquid assets and will demand higher yields for longer-term securities that are less liquid.