Accounting

You have decided to buy a new automobile and have been gathering information about the purchase price. The manufacturer’s website shows a “list price” of $44,500, which includes your preferred options: leather trim and navigation. You have also consulted the “Blue Book” guide to car prices and found that the average price paid for a similar new vehicle is $39,500. However, the guide also indicates that recent selling prices have ranged from $38,000 up to $42,000.

Required:

1.  Which price quote, the “list price” or the “Blue Book” average price, is the more relevant for your decision? Why?

2.  Which price quote is more representationally faithful? Why?

Solution: