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(a)
Introduction: The going concern concept indicates that the company will continue its operations for an indefinite period and will not liquidate in the early future. As per the accounting principles, company is considered as a going concern when there is no evidence to believe that it will cease its operations in near future.
To find:The description of continuity by Sprouse and Moonitz.
(b)
Introduction: The going concern concept indicates that the company will continue its operations for an indefinite period and will not liquidate in the early future. As per the accounting principles, company is considered as a going concern when there is no evidence to believe that it will cease its operations in near future.
To find:Whether historical cost of company’s assets is relevant while planning to buy a business. Also, determine the asset values that would be relevant to the decision of investment.
(c)
Introduction: The going concern concept indicates that the company will continue its operations for an indefinite period and will not liquidate in the early future. As per the accounting principles, company is considered as a going concern when there is no evidence to believe that it will cease its operations in near future.
To find: Whether continuity is presumed when company is bankrupt and plans to liquidate its assets. Also, determine the impact of lack of continuity on measurement of assets.
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Chapter 2 Solutions
Financial Accounting Theory And Analysis: Text And Cases, 12th Edition: Text And Cases
- Aurum Inc. prepared a fixed budget of 80,000 direct labor hours, with estimated overhead costs of $400,000 for variable overhead and $120,000 for fixed overhead. Aurum then prepared a flexible budget of 72,000 labor hours. How much are total overhead costs at this level of activity?arrow_forwardNHT Corp. pays $1,200 annually for insurance. If the company pays the entire premium in advance on January 1, what adjusting entry should be made at the end of March? (A) Debit Insurance Expense $1,200 (B) Credit Prepaid Insurance $300 (C) Debit Prepaid Insurance $900 (D) Credit Insurance Expense $300 MCQarrow_forwardA company carries an average annual inventory of $4.3 million if it estimates the cost of capital is 13% so much costs are 9% and risk calls are 8%. What does it cost per year to carry this inventory?arrow_forward
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