At the End of the Year, Ford Realizes It Has

question 28

Multiple Choice

At the end of the year, Ford realizes it has overproduced Fiestas, because 2,500 of them are left unsold. How is this accounted for in that year's GDP? The cars are:

• A) considered inventory and their value will increase investment.
• B) considered durable goods, and their value will increase consumption.
• C) not counted until they are sold in next year's GDP.
• D) considered a bad thing and reduce the value of investment.

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Definitions:

Interest Expense

This is the cost incurred by an entity for borrowed funds, and it is typically reported on the income statement as a non-operating expense.

Premium Account

An account credited with the amount by which a security is issued above its par value, featuring benefits or terms superior to those of standard accounts.

Unearned Liability

An obligation that arises when a business receives payment for goods or services that have not yet been delivered or performed, also known as deferred revenue.

Bonds Payable

A financial accounting term for the outstanding debt a company owes to bondholders, to be paid at a future date.