Joe Pre-Orders a Non-Refundable Movie Ticket

question 105

Multiple Choice

Joe pre-orders a non-refundable movie ticket.He then reads a number of reviews of the movie in question that make him realize that he will not enjoy it.He goes to see it anyway,rationalizing that otherwise his money will have been wasted.Is Joe succumbing to the Sunk Cost Fallacy,and why?

• A)Yes,since he invested a valuable asset,his time,in a project based on its previous costs.
• B)No,because the cost of the movie was not recoverable and would have been lost whatever action he took.
• C)No,because going to see the movie means that the product of his initial investment was realized as originally planned.
• D)No,because he incurred no further costs by going to see the movie.
• E)No,because he won't know for sure if he enjoys the movie until he sees it.

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Definitions:

General Journal Entries

Accounting entries recorded in the general journal that document business transactions not handled by specialized journals.

Adjusted Trial Balance

A list of all accounts and their balances after adjustments, used to verify the balance of debits and credits and to prepare financial statements.

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity, summarizing transactions over a period.

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account column totals that are equal.