Michael McNamee is the proprietor of a property management company, Apartment Exchange, near the campus of Penscola State College. The business has cash of $8,000 and furniture that cost $9,000 and has a market value of $13,000. The business debts include accounts payable of $6,000. Michael's personal home is valued at $400,000, and his personal bank account has a balance of $1,200. Identify the principle or assumption that best matches the situation:

a. Michael's personal assets are not recorded on the Apartment Exchange's balance sheet.

b. The Apartment Exchange records furniture at its cost of $9,000, not its market value of $13,000.

c. The Apartment Exchange reports its financial statements in U. S. dollars.

d. Michael expects the Apartment Exchange to remain in operations for the foreseeable future.

Question

Business

Mariah Burch

12 February, 10:40

Michael McNamee is the proprietor of a property management company, Apartment Exchange, near the campus of Penscola State College. The business has cash of $8,000 and furniture that cost $9,000 and has a market value of $13,000. The business debts include accounts payable of $6,000. Michael's personal home is valued at $400,000, and his personal bank account has a balance of $1,200. Identify the principle or assumption that best matches the situation:

a. Michael's personal assets are not recorded on the Apartment Exchange's balance sheet.

b. The Apartment Exchange records furniture at its cost of $9,000, not its market value of $13,000.

c. The Apartment Exchange reports its financial statements in U. S. dollars.

d. Michael expects the Apartment Exchange to remain in operations for the foreseeable future.

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Answers (1)

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Erickson · Answer 1

a. Michael's personal assets are not recorded on the Apartment Exchange's balance sheet - the economic entity assumption.

b. The Apartment Exchange records furniture at its cost of $9,000, not its market value of $13,000 - the cost principle.

c. The Apartment Exchange reports its financial statements in U. S. dollars - the monetary unit assumption.

d. Michael expects the Apartment Exchange to remain in operations for the foreseeable future - the going concern assumption.