For the Following Question(s), Suppose an Economy Produces Only Pens

question 34

Multiple Choice

For the following question(s) , suppose an economy produces only pens and pencils, and that the quantity and price data is given by this table:

-What is the inflation rate using base year 1?

• A) 10%
• B) 15%
• C) 20%
• D) 25%
• E) 13%

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Definitions:

Permanent Account

An account that is not closed at the end of the accounting period and whose balances are carried forward into the next period.

Allowance for Doubtful Accounts

An accounting method used to estimate the portion of accounts receivable that is expected not to be collected.

Net Realizable Value

The amount (Accounts Receivable – Allowance for Doubtful Accounts) that is expected to be collected.

Gross Accounts Receivable

The total amount owed to a company by its customers for goods or services delivered on credit before any deductions for returns or bad debts.