Until Recently, George Lived in a Home That Was Newly

question 30

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 $225,000. 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.

Grasp the reasons why investors stage their capital commitments.

Understand the valuation methods for private companies and their implications.

Appreciate the importance of legal and accounting advice in the deal-making process.

Know the terms and effects of specific venture investment rounds (e.g., cram-down round).

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Definitions:

Labor Rate Variance

The difference between the actual cost of labor and the budgeted cost of labor at the standard rate.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on standard cost accounting.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on the predetermined rate.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a specific product and included in the direct costs of production.