Scenario 15-2 Consider a Local, Privately-Owned Electrical Cooperative Named Poweshiek Power Company

question 321

Multiple Choice

Scenario 15-2
Consider a local, privately-owned electrical cooperative named Poweshiek Power Company (PPCo) . PPCo has just completed a clean-coal-burning electrical power plant in Iowa. Currently, PPCo can meet the electricity needs of all residents in the county. In fact, its capacity far exceeds the needs of the county. After just a few years of operation, the shareholders of PPCo experienced incredibly high rates of return on their investment due to the profitability of the corporation.
-Refer to Scenario 15-2. PPCo will continue to be a monopolist in the electricity industry only if

• A)population growth leads to an increased demand for electricity.
• B)there are no new entrants to the market.
• C)the price of natural gas decreases.
• D)All of the above are correct.

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Definitions:

Impairment Loss

A recognized reduction in the recoverable amount of an asset, indicating that its market value has dropped below its book value on the balance sheet.

Double-Declining-Balance

A method of accelerated depreciation which doubles the regular depreciation amount.

Capitalize Development Costs

The accounting practice of adding the costs associated with developing a new product or service to the balance sheet as an asset, rather than expensing them.

Research Costs

Expenses related to the investigation and discovery of new knowledge that could be useful for the development of new products or services.