Until Recently,George Lived in a Home That Was Newly Constructed

question 80

Multiple Choice

Until recently,George lived in a home that was newly constructed in 2005.In 2005,he paid $200,000 for the brand new house.He sold the house in 2006 for $225,0000.Which of the following statements is correct regarding the sale of the house?

• A)The 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP.
• B)The 2006 sale increased 2006 GDP by $25,000 and had no effect on 2005 GDP.
• C)The 2006 sale increased 2006 GDP by $225,000; furthermore, the 2006 sale caused 2005 GDP to be revised upward by $25,000.
• D)The 2006 sale affected neither 2005 GDP nor 2006 GDP.

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Definitions:

Internal Transactions

Transactions that occur within a company, affecting its financial or operational position without involving an exchange with external entities.

Account Balances

The total amount of money in an account, calculated by adding all credits and subtracting all debits.

Adjusting Journal Entry

Entries made in accounting records at the end of an accounting period to allocate revenue and expenses to the period in which they actually occurred.

Expected Life

The estimated duration over which an asset is anticipated to be usable for its intended purpose, often affecting depreciation calculations.