Dave, a Student Who Knits Ski Caps with Tassels, Sells

question 79

Multiple Choice

Dave, a student who knits ski caps with tassels, sells the same number of caps this year as last year, but at 20 percent higher prices. What can we conclude?

• A)He must be better off than last year because his income is higher.
• B)We do not have enough information to tell whether he is better off this year than last year.
• C)He cannot be better off than last year because he sold the same number of caps both years.
• D)He is better off this year only if there was no inflation over the past year.

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Definitions:

Residual Value

The estimated amount that an asset will realize upon its disposal at the end of its useful life, less the cost of disposal, if any.

Accumulated Depreciation

The total amount of depreciation expense that has been charged against an asset since it was acquired.

Gain on Sale

The profit earned from selling an asset for more than its purchase price.

Net Realisable Value

The projected sales price under normal business operations minus the anticipated expenses to complete and the estimated costs required for the sale.