An individual is considering whether to fly or take the train for an upcoming trip. This individual works remotely for $10/hour, but will not be able to work while on the airplane or train. The flight would take two hours and cost $125; the train would take eight hours and cost $50. What are the respective total economic costs of taking the flight and taking the train?

• A.$20 and $80
• B.$125 and $50
• C.$145 and $130
• D.$75 and $175

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A music executive is trying to determine the effect that advertising expenditures (in dollars) have on digital music sales. After gathering sales data from the previous 12 quarters, the executive finds the effect that advertising expenditures have on digital music sales can be described by the following equation:
Digital music sales = 9,500 + 0.15*(advertising expenditures)
Based on this equation, which of the statements below is correct?

• A.Each additional $0.15 spent on advertising increases digital music sales by $1.00 on average.
• B.Each additional $1.00 spent on advertising increases digital music sales by 9,500 units on average.
• C.Each additional $1,000 spent on advertising increases digital music sales by $0.15 on average.
• D.Each additional $1.00 spent on advertising increases digital music sales by $0.15 on average.

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Company B sold a service contract that covers a two-year period for $10,000. The service period commenced on July 1, Year 1. Service revenue is recognized evenly throughout the contract period. What amount should Company B report as deferred revenue from this service contract on its balance sheet on December 31, Year 1?

• A.$2,500
• B.$5,000
• C.$7,500
• D.$10,000

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Why are ratios important when comparing different companies within the same industry?

• A.Accounting policies might be different between companies.
• B.They reflect macroeconomic factors.
• C.They eliminate the effect of size differences among the different companies.
• D.They are useful for assessing the stage of the industry.

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Which of the following options represent implicit transactions? (Select all that apply.)

• A.Recording a loss on the sale of a piece of plant equipment
• B.Interest expense accrued at the end of the fiscal year
• C.The recognition of revenue over time related to payment received in advance for a multiyear contract
• D.An inter-company sale of goods under a short term agreement
• E.The repurchase of shares of the company's stock

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