If Consumption Is $750 When Real Disposable Income Is $1,000

question 434

Multiple Choice

If consumption is $750 when real disposable income is $1,000, the average propensity to consume is

• A)0.80.
• B)0.75.
• C)0.50.
• D)0.25.

Learn the effects of sales discounts on revenue recognition and how they are recorded in financial statements.

Understand the operation of merchandisers and retailers and the role of inventory in their financial transactions.

Grasp the implications and application of credit terms in sales transactions.

Identify the accounting treatment for sales tax payable and the importance of sales tax in financial transactions.

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Definitions:

Carryforward

A tax provision allowing current losses or credits to be used in future tax years to offset potential gains or income.

Net Income

The amount of earnings left after all expenses, taxes, and costs have been subtracted from total revenue.

FMV

Fair Market Value, an estimate of the market value of a property or asset, based on what a knowledgeable, willing, and unpressured buyer would likely pay to a knowledgeable, willing, and unpressured seller in the market.

Tax Depreciation

The deduction of a portion of the cost of a business asset from taxable income over the asset's useful life, as allowed by tax laws.