Question

1) The going concern or continuity assumption is critical to financial accounting. The assumption

A) Is always maintained for all firms for all years

B) Supports the use of historical cost valuation for assets rather than market values

C) Means that a corporation has a definite ending date

D) Requires that we immediately expense prepaid accounts because they do not represent a future cash inflow

Why the answer is not A

6) A company started business on January 1, year 1. At the end of year 1, the financial statement+showed the following amounts: Sales $180 Cost of goods sold Expenses Accrued wages payable Accounts receivable Accounts payable Income on the accrual basis and net cash inflow from operating activities were: Income accrual basis Cash inflow from operating activities A) $28 $22 B) $68 C) $28 $28 D) $68 $22 $62

MCQ- How to get these numbers

Answer 1

1)	The answer can't be option A because the future is full of uncertainty, no firm can provide assurance regarding their existence in future.

6)	Income on Accrual Basis
		Sales		$    180.00
	Less:	Cost of Goods sold		$ (112.00)
		Gross Margin		$      68.00
	Less:	Expenses		$     (40.00)
		Net Income		$      28.00
	Cash Flow from Operating Activities
		Net Income			$           28.00
	Add:	Increase in Accrued wages payable			$             4.00
	Less:	Increase in Accounts Receivable			$         (18.00)
	Add:	Increase in Accounts Payable			$             8.00
		Net Cash flow from Operating Act.			$           22.00

7)	Cash Flow from Operating Activities
		Net Income			$ 125,000.00
	Add:	Impairment loss recorded			$   10,000.00
	Less:	Increase in Accounts Receivable			$ (32,000.00)
	Add:	Decrease in Inventory			$     8,000.00
					$111,000.00

9)		Beginning balance			$   52,300.00
	Add:	Purchase			$ 141,700.00
	Less:	Ending Balance			$ (41,800.00)
		Supplies Expense			$152,200.00