Josh Will Receive a Salary of $300,000 Next Year

question 278

Multiple Choice

Josh will receive a salary of $300,000 next year. According to prospect theory,

• A)Josh will be happy with that amount regardless of what he has made in the past.
• B)Josh will only be happy with that salary if everyone else around him makes less than he does.
• C)Josh will only be happy with that salary if his cost of living has not increased.
• D)Josh's satisfaction with that salary depends on how much he made in the past.

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Definitions:

Dollar Amount

The value of a transaction or an item expressed in units of currency.

Allowance Method

An accounting technique that estimates and prepares for the amount of bad debts customers might not pay.

Direct Write-Off Method

The method of accounting for uncollectible accounts that recognizes the expense only when accounts are judged to be worthless.

Uncollectible Accounts

Funds that a company is unable to collect from its debtors, leading to recognition as a loss.