Ava Buys a $2,000 Computer Using a Paper Check

question 54

Multiple Choice

Ava buys a $2,000 computer using a paper check. At which step does $2,000 get recorded in M1?

• A) When Ava hands the $2,000 check to the computer merchant.
• B) Once the $2,000 is credited to the merchant bank's reserve account and is debited from Ava's bank account.
• C) Once the Federal Reserve sends the paper check (or an electronic image) to Ava's bank.
• D) The check is never M1. The $2,000 is M1 both in Ava's bank account and, later, in the merchant's account. It is the deposit balance that is counted.

Recognize how transactions affect account balances within the double-entry accounting system.

Analyze the impact of transactions on a company’s financial statements.

Interpret the function and organization of a chart of accounts.

Distinguish between prepaid expenses, unearned revenues, and notes payable.

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Definitions:

Cortisol

A steroid hormone produced by the adrenal gland, released in response to stress and low blood-glucose concentration.

Metabolic Rate

The rate at which the body uses energy, measured in calories, to maintain vital functions while at rest.

Stress Hormone

Hormones, such as cortisol, released in the body's response to stress, affecting various bodily functions.

Cortisol

A steroid hormone produced by the adrenal glands, often released in response to stress and low blood-glucose concentration.