Explain the principle of indemnity. How does one measure indemnity?
What will be an ideal response?
The principle of indemnity states that a person should be financially put back in the same position after a loss compared to before. The usual definition of indemnity is replacement cost less depreciation. Replacement cost is the amount needed to repair or replace property with like kind of material. Depreciation is a measurement of betterment for receiving new for old once repaired.
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When the amount for a debit entry in a journal is transferred to a specific account in the general ledger, it must be recorded
a. as a debit to that account in the general ledger. b. as a credit to that account in the general ledger. c. in sum only, without any regard for debit or credit, since the general ledger accounts do not have spaces for debit and credit entries. d. cannot be determined without further information.
Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural ingredients and organically raised lamb. This brand has a strong following and is recommended by veterinarians who practice in affluent neighborhoods. Wholesome's main supplier of lamb has announced that the price for lamb will be 15 percent higher next year. Which one of the following is
true? A) Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer. B) Companies pursuing Wholesome's business strategy are especially vulnerable to this risk. C) If Wholesome raises its pet food prices, customers will turn to less expensive brands such as Purina. D) Wholesome probably operates on very thin margins, and a cost increase will threaten its ability to earn average returns.