Question

Assumptions in Financial Reporting. Indicate the assumption (going concern, business/economic entity, monetary unit, or periodicity) that best fits the following scenarios.ScenarioRelated Assumptiona. Monro Manufacturing requires that its division managers report to corporate headquarters on a monthly basis.b. Rainbow Paints, Inc. owns 15% of New Eljam Company. Rainbow does not consolidate this affiliate company because it cannot control its operations.c. Financial analysts at Nelson Corporation use an infinite-growth assumption in building a model to value the company.d. Factory buildings are reported on Jack Jones Warehousing, Inc.’s balance sheet as the sum of the total cost of two plants; one of the plants was acquired in 1951 and the other was purchased in 2011

Answer 1

Answer:

a) Periodicity

b) business/economic entity

c) going concern

d) monetary unit

Explanation:

Periodicity concept explains that every accounting period has its own associated an economic activities which can easily be measured and accounted for.

The economic entity states activities of a business should be recorded separate from the owners.

Going concern principle states that the business will be in operation for the next foreseeable future

Monetary unit principle states that value for business transactions and events can easily be determined by use of money unit