What Is the True Purchasing Power One Year from Now

question 31

Multiple Choice

What is the true purchasing power one year from now of $1,000 in a savings account,if it is earning 2 percent APY and inflation is 3 percent?

• A)$1,000.00
• B)$1,020.00
• C)$990.00
• D)$1,010.00

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Definitions:

Statement of Financial Position

A financial statement detailing an organization's assets, liabilities, and equity at a specific point in time, known as the balance sheet.

Shareholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing the ownership interest of shareholders.

SFAS No.123

A Statement of Financial Accounting Standards providing guidance on stock-based compensation, requiring companies to expense the cost of employee services received in exchange for an award of equity instruments.

APB No.25

Accounting Principles Board Opinion No. 25, which outlined the method for accounting for stock issued to employees, focusing primarily on the intrinsic value method.