At the Beginning of 2018,Baldwin Corporation Bought an Automobile for $36,000

question 155

Multiple Choice

At the beginning of 2018,Baldwin Corporation bought an automobile for $36,000 by issuing a note payable.The automobile has a six-year life and is depreciated using the straight-line method.To determine net cash flow from operating activities for 2018 using the indirect method,net income should be:

• A)Increased by $6,000.
• B)Decreased by $6,000.
• C)Increased by $42,000.
• D)Neither increased nor decreased.No adjustments are necessary since no cash was received or paid.

---

Definitions:

Income Effect

The change in an individual's consumption choices resulting from a change in their real income.

Substitution Effect

The economic understanding that as prices rise (or incomes decrease), consumers will replace more expensive items with less costly alternatives.

Inferior Good

A type of good for which demand decreases when the income of the consumer increases, inversely related to normal goods.

Income Effect

The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.