Identify the assumption represented in each scenario, the decide if it is satisfied or violated
Scenario
Assumption
Satisfied or violated?
Bettas Inc. adjusted the valuation of balance sheet items to keep up with changes in inflation.
Sounders Inc. is facing bankruptcy — they choose not to list assets and liabilities at liquidation values on the balance sheet.
Woods Co. issues quarterly and annual financial statements to external users.
TNT Studio's president only uses the company limo for business purposes.
What will be an ideal response?
Answer:
Scenario
Assumption
Satisfied or violated?
Bettas Inc. adjusted the valuation of balance sheet items to keep up with changes in inflation.
Monetary Unit
Violated
Sounders Inc. is facing bankruptcy — they choose not to list assets and liabilities at liquidation values on the balance sheet.
Going concern
Violated
Woods Co. issues quarterly and annual financial statements to external users.
Periodicity
Satisfied
TNT Studio's president only uses the company limo for business purposes.
Economic Entity
Satisfied
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