Question : 41) Kelly’s Surf Shop orders 5,000 new surf boards at : 1238450

Economics

41) Kelly’s Surf Shop orders 5,000 new surf boards at the beginning of the year but only sells 4,500 by the end of the year. How are the 500 unsold surfboards accounted for in Gross Domestic Product?

A) They will be included in the nondurable consumption category of GDP.

B) They will be included in the residential investment category of GDP.

C) They will be included in the government spending category of GDP.

D) They will be included in the inventory investment category of GDP.

E) They will be included in the durable consumption category of GDP.

42) When measuring GDP,

A) the government sector is not included because it is the public sector not the private sector.

B) the government sector is counted, and the value of the government sector in GDP is equal to its tax revenue.

C) only the federal government’s expenditure on goods and services are included.

D) the expenditure on goods and services by all levels of government are included.

E) the government sector is not counted because it does not produce goods and services.

43) Government expenditures on goods and services include

i.the New York City Library’s purchase of new books.

ii.Washington D.C.’s purchase of gas for its city buses.

iii.California’s payment of wages to prison guards.

A) i and ii

B) i and iii

C) ii and iii

D) i, ii and iii

E) i only

44) Net exports of goods and services is equal to the value of

A) exports plus the value of imports.

B) imports minus the value of exports.

C) domestic consumption minus the value of imports.

D) exports minus the value of imports.

E) domestic consumption minus the value of exports.

45) Net exports of goods and services are defined as the

A) value of the goods we sell to foreigners.

B) income we receive from selling goods to foreigners.

C) value of exports minus the value of imports.

D) value of exports minus the income we receive from foreigners.

E) value of exports plus the income we receive from foreigners.

46) U.S. net exports include

A) sales of Hollywood movies to the rest of the world.

B) the production of Ford Mustangs in China that are sold in China.

C) Honda automobiles produced and sold in Japan.

D) the sale of shares of Nike stock on the New York Stock Exchange.

E) the sale of U.S. government securities to U.S. citizens.

47) In calculating GDP, we must

A) add the market value of imports and subtract the market value of exports.

B) add the market value of exports and subtract the market value of imports.

C) exclude net exports of goods and services (NX).

D) add the value of the goods produced outside of the United States by American firms.

E) subtract the market value of imports, because these goods are produced in a country other than the United States, and subtract the market value of exports, because these goods are consumed in a country other than the United States.

48) Which of the following expenditure components of GDP can be negative or positive?

A) Consumption expenditure

B) Investment

C) Government expenditure on goods and services

D) Net exports of goods and services

E) None of the above because expenditure can never be negative.

49) Last year U.S. net exports of goods and services was negative. This fact means that last year

A) there was an error made when calculating net exports of goods and services for the United States.

B) the value of U.S. exports was greater than the value of U.S. imports.

C) the value of U.S. exports was less than the value of U.S. imports.

D) U.S. consumption expenditure plus investment was less than the value of exports plus the value of imports.

E) U.S. consumption expenditure plus investment plus government expenditures on goods and services was less than the value of exports plus the value of imports.

50) When an American college student in Davis, California spends $200 on a pair of Louis Vuitton jeans (a famous French brand), U.S. consumption ________, U.S. net exports ________, and U.S. GDP ________.

A) does not change; increases by $200; increases by $200

B) increases by $200; decreases by $200; does not change

C) increases by $200; does not change; increases by $200

D) does not change; does not change; does not change

E) does not change; decreases by $200; decreases by $200

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July 1, 2023

21. The percentage-of-sales procedure arises from the idea that uncollectible amounts will vary with the volume of credit business. The firm estimates the appropriate percentage by studying its own experience or by inquiring into the experience of similar firms. Default rates generally fall within the range of .01% to .02% of credit sales.

22. The percentage-of-completion method measures the proportion of total work carried out during the accounting period either from engineers' estimates of the degree of completion or from the ratio of costs incurred to date to the total costs expected for the entire contract.

23. A common-size income statement expresses each expense and net income as a percentage of
A. assets.
B. revenues.
C. liabilities.
D. expenses.
E. shareholders’ equity.

24. If the firm has received a promise of payment but cannot measure this promise with reasonable reliability,
A. U.S. GAAP would permit revenue to be recognized, but IFRS would not permit revenue to be recognized.
B. U.S. GAAP would not permit revenue to be recognized, but IFRS would permit revenue to be recognized.
C. neither U.S. GAAP nor IFRS would permit revenue to be recognized.
D. U.S. GAAP and IFRS would permit revenue to be recognized.
E. none of the above

25. Which section includes income derived from a firm’s primary business activities as well as from activities peripherally related to operations? (The firm expects these sources of earnings to continue.)
A. income from continuing operations
B. income, gains, and losses from discontinued operations
C. extraordinary gains and losses
D. retained earnings
E. paid-in-capital

26. Operating risks
A. include variability in sales from changing economic conditions (cyclicality risk).
B. include variability in sales from short product life cycles (because of technological change or changes in consumer taste).
C. include variability of earnings that arises when the firm has a high proportion of fixed costs that do not change as sales change.
D. Answers a, b, and c are correct.
E. None of these answer choices is correct.

27. Ulrich Co. sells an asset to a buyer for a total sales price of $6,000 with a payment schedule of $2,000 in year 1, $2,000 in year 2, and $2,000 in year 3. The cost of the asset is $5,000. Under the cost-recovery-first method, what amount of net profit is recognized in year 3?
A. $2,000
B. $1,000
C. $666.67
D. $333.33
E. $0

28. Which of the following is true regarding income recognition?
A. The seller must have substantially performed its obligations to the customer (for example, by transferring ownership of goods to the customer).
B. The seller must have obtained an asset from the customer that it can reliably measure. If the asset is not cash, the seller must be reasonably certain of converting it into cash.
C. The firm recognizes expenses when it consumes assets.
D. If an event or transaction leads to the recognition of revenue, the firm matches the consumption of any assets (the expense), in time, with the revenue recognized.
E. all of the above

29. Cowden Properties

Cowden Properties sold a condominium to Ms. Roberts for $90,000. Cowden originally acquired the condo at a cost of $40,000 and made improvements to the unit totaling $20,000. The contract for sale required Ms. Roberts to pay the $90,000 as follows: