When a Tax Is Levied on the Sale of an Item

question 90

Multiple Choice

When a tax is levied on the sale of an item,

• A) consumers will generally buy more of it.
• B) producers will generally supply more of it.
• C) the price (including the tax) of the product will generally decline.
• D) less of the item will generally be bought and sold.

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Definitions:

Noncash Credits

Transactions that increase a company's assets or decrease liabilities without the direct movement of cash.

Indirect Method

A technique used in cash flow statements to adjust net income for non-cash transactions, deferrals, and accruals to compute operating cash flow.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the loss of value over time.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer.