Will Wisp Will Live for Exactly Two Periods

question 6

Multiple Choice

Will Wisp will live for exactly two periods. His utility function is U(c₁, c₂) = c₁c₂, where c₁ is consumption in period 1 and c₂ is consumption in period 2. He will have no income in period 2. His income in period 1 is $40,000. If the interest rate rises from 10 to 14%:

• A) his savings will increase by 4% and his consumption in period 2 will increase.
• B) his consumption in both periods will increase.
• C) his consumption in both periods will decrease.
• D) his savings will not change but his consumption in period 2 will increase by $800.
• E) his consumption in period 1 will decrease by 14% and his consumption in period 2 will increase.

Prepare journal entries related to equity method investments including initial recognition, recognition of investee's net income or loss, and dividends received.

Calculate and defer gross profit on inter-entity inventory sales and recognize it appropriately in subsequent periods.

Determine the fair value of investments and adjustments for excess cost over book value attributable to specific intangible assets and goodwill.

Analyze transactions to identify significant influence over an investee and the accounting implications.

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Definitions:

Counterconditioning

A behavioral therapy technique that involves pairing a stimulus that elicits an unwanted response with a new, desired response.

Systematic Desensitization

A behavioral therapy technique designed to gradually reduce fear, anxiety, or phobia by gradually exposing the person to the feared object or context in a controlled manner.

Systematic Desensitization

A behavioral therapy technique aimed at reducing phobic reactions and anxiety by gradually exposing the person to the feared object or context in a controlled manner.

Relaxation Exercises

Techniques designed to reduce stress and anxiety, promote relaxation, and improve overall mental and physical well-being, such as deep breathing, meditation, and progressive muscle relaxation.