Suppose the U

question 90

Multiple Choice

Suppose the U.S.dollar is backed by one-sixth of an ounce of gold and the British pound is backed by one-third of an ounce of gold.The exchange rate between the U.S.dollar and the British pound equals ________ per pound.

• A)$0.50
• B)$1.00
• C)$1.50
• D)$2.00

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Definitions:

Cost Concept

An accounting principle that dictates that all assets are recorded and reported at their original purchase cost rather than their current market value.

Owner's Equity

The residual interest in the assets of a business after all liabilities have been deducted, often referred to as net assets or shareholder equity.

Assets

Resources owned by a business with future economic benefits.

Investments

The balance sheet caption used to report long-term investments in stocks not intended as a source of cash in the normal operations of the business.