An Elderly Relative Offers to Sell You Their Used 1958

question 86

Multiple Choice

An elderly relative offers to sell you their used 1958 Cadillac Eldorado for $50,000.You note that very similar cars are selling on the open market for $90,000.You don't care for classic cars and would rather buy a new Ford Explorer for $35,000.What is the net value of buying the Cadillac?

• A)$90,000,since the Cadillac could be sold for this price.
• B)$50,000,since the Cadillac could be bought for this price.
• C)$40,000,since this is the difference between purchase and resale price of the Cadillac.
• D)$35,000,since this is the value of the car that you really want to buy.

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Definitions:

Prepaid Rent

An asset account on the balance sheet representing rent payments made in advance of the rental period.

Adjusting Entry

A journal entry made in accounting records at the end of an accounting period to allocate income and expenditure to the appropriate periods.

Accrued Fees

Charges that have been incurred but not yet paid or recorded at the end of a reporting period, representing liabilities on the balance sheet.

Earned

Earned typically refers to income or revenue that has been generated from businesses activities or investments and is recognized upon the delivery of goods or services.