On December 31, 2013, a Company Had an Item (That

question 156

Multiple Choice

On December 31, 2013, a company had an item (that it sells regularly) which was returned by a customer because it was defective. Although it originally cost $150, and was sold to the customer for $280, it can be sold as used for only $140. Prior to making it saleable the company must spend $30 to repair it and the estimated cost to resell it is $20. The company expects a normal profit of 10 percent on the resale of damaged merchandise. The net realizable value (NRV) of this item is:

• A) $76
• B) $90
• C) $110
• D) $150

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Definitions:

Real Interest Rate

The Real Interest Rate is the nominal interest rate adjusted for inflation, reflecting the true cost of borrowing or the true return on savings.

Economic Efficiency

Refers to the optimal production and distribution of resources to maximize social welfare and minimize waste.

Real Wage

The purchasing power of wages, adjusted for inflation, indicating the quantity of goods and services that can be bought.

Purchasing Power

The ability of an individual or entity to buy goods and services, essentially reflecting the amount of goods or services that one unit of currency can buy.