Indicate whether each of the following statements is true or false:
1. Nominal dollar capital maintenance assumes that earnings are distributable once the dollar level of investment has been maintained.
2. Nominal dollar financial capital maintenance is the only feasible basis for measuring earnings for a modern diversified business corporation.
3. The separate- entity assumption means that there must be no financial transactions between the business entity and its owners, except for the payment of dividends.
4. The continuity assumption means that it is feasible to prepare corporate financial statements at any point over the continuity of time.
5. The time- period assumption means that it is feasible to prepare meaningful annual financial statements, even though the entity still has many unfulfilled transactions outstanding.
6. The continuity assumption states that a business entity will last long enough for its assets to be used up and its liabilities settled.
7. The entity basis of reporting is the same as consolidated reporting, wherein all resources under the control of the shareholders of the parent company are combined into financial statements for the entire economic entity.
8. Under the proprietary assumption, financial statements are prepared from the point of view of the enterprise’s owners.
9. The unit- of- measure assumption states that it is meaningful to express the affairs of an enterprise in currency units.
10. Because of the continuity assumption, it is impossible to prepare meaningful financial statements for a bankrupt company.

  • CreatedFebruary 17, 2015
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