Generally accepted accounting principles (GAAP), developed by the Financial Accounting Standards Board (FASB), require that public companies in the U.S. follow a standard approach when reporting information on financial statements. pay for the company’s stock today? Genestek Inc. just paid a $5.00 dividend. As a matter of pure physics, no. B. © copyright 2003-2020 Study.com. Become a Study.com member to unlock this The new schedule will "continue indefinitely until consumer demand for Las Vegas increases," the company announced this week. - Purpose, Importance & Relationship to Business, External and Internal Users and Uses of Accounting, The Accounting Equation: Definition & Components, The Purpose of Notes on Financial Statements, Adjusting Entries: Definition, Types & Examples, Matching Concept in Accounting: Definition & Example, The World is Flat by Thomas Friedman: Summary & Quotes, Cash Receipts Journal: Definition & Examples, What Is Financial Reporting? Textbook solution for Finite Mathematics 7th Edition Stefan Waner Chapter 2.2 Problem 59E. Stock Valuation Suppose you know that a company’s stock currently sells for C) Economic entity. All other trademarks and copyrights are the property of their respective owners. In other words, the going concern concept assumes that businesses will have a long life and not close or be sold in the immediate future. Assume that Bolton Company will pay a $2.00 dividend per share next year, an increase from the current dividend of $1.50 per share that was just paid. Stock analysts just predicted that Hybrid Engine Company's earnings and dividends will grow at 20% each year for the next two years due to its new invention. Going-Concern Value: The going-concern value of a company is a value that assumes the company will remain in business indefinitely and continue to be … Eventually return some — but not all — of your users and assets to the office. These principles comply with accounting standards such as IFRS and US GAAP. ААА ААА МИ ( 0 1 -3 (d) 2 3 (e) WW/l uw W W (6) (9) Decide which of the functions are periodic. Bayt.com is the leading job site in the Middle East and North Africa, connecting job seekers with employers looking to hire. Services, What Is GAAP? Some examples of these principles are economic entity, going concern, accrual, and matching principle. Based upon the dollar amount of cash paid or received, transactions are recorded. ... they may assume … - Principles, Process & Examples, What Is a General Ledger? What is the value of the company’s equity? The going concern concept or going concern assumption states that businesses should be treated as if they will continue to operate indefinitely or at least long enough to accomplish their objectives. b. Sciences, Culinary Arts and Personal $28.57. The underlying assumption that presumes a company will continue indefinitely is: A) Periodicity. Monetary Unit Assumption. Describe the two constraints inherent in the... Neutrality is an ingredient of: sr. D. $31.78. The going concern principle of accounting assumes that a company is going to continue its business operations indefinitely. Absorption costing could result in an increase in net income if a company increases its production and its inventory. - Purpose, Statement Examples & Analysis, Abraham Maslow's Contribution to the Humanistic Movement in Psychology, Financial Accounting for Teachers: Professional Development, Financial Accounting: Skills Development & Training, UExcel Financial Accounting: Study Guide & Test Prep, Praxis Chemistry (5245): Practice & Study Guide, History 106: The Civil War and Reconstruction, Praxis Marketing Education (5561): Practice & Study Guide, Praxis Health Education (5551): Practice & Study Guide, Psychology 107: Life Span Developmental Psychology, SAT Subject Test US History: Practice and Study Guide, Praxis Environmental Education: Practice and Study Guide, Praxis English Language Arts - Content Knowledge (5038): Practice & Study Guide, Geography 101: Human & Cultural Geography, Intro to Excel: Essential Training & Tutorials, Biological and Biomedical Indefinitely? Services, What Is GAAP? To assess the impact on SAP's value, you may assume that the additional value comes from the savings from a lower cost of capital each year, and that the savings will continue indefinitely. 1. Which of the following principles assumes that a business will continue indefinitely? of 4.75%. Sciences, Culinary Arts and Personal Going concern is an accounting term for a company that has the resources needed to continue operating indefinitely until it provides evidence to the contrary. $28.79. Question 1. What is the effective annual interest rate offered by e-Money if the compounding interval is (a) annual (b) monthly (c) weekly (d) continuously? Which of the following statements is not true? answer! What is the debt to value ratio? The Sun will die out in 6 Trillion years. 16 Assume that the rates shown continue indefinitely. Assume that according to the company's published reports, this dividend is expected to continue to grow 8 percent per year for the first 2 years and then 5 percent per year thereafter. © copyright 2003-2020 Study.com. D) Monetary unit. Several outlets have reported on experts’ concerns about such a plan. After that, the dividend is expected to increase at a constant rate of 5%. All rights reserved. The model, similar to the dividend discount model, theorizes the stock is worth the sum of all future dividend payments, discounted to the present value. The correct answer is option d. Going concern, which means that a company will continue to operate in the future, barring any unforeseeable events... See full answer below. - The Generally Accepted Accounting Principles, Working Scholars® Bringing Tuition-Free College to the Community. - Definition & Examples, The Differences Between Accrual & Cash-Basis Accounting, Accounting Cycle: Definition, Steps & Process, The Accounting Cycle: Definition, Steps & Examples, What is Bank Reconciliation? - Definition & Examples, The Differences Between Accrual & Cash-Basis Accounting, Accounting Cycle: Definition, Steps & Process, The Accounting Cycle: Definition, Steps & Examples, What is Bank Reconciliation? Tough homework and study questions require a 12 % return on the power company ’ s business is going continue. Inherent in the... Neutrality is an ingredient of: sr left and right in Middle... 100,000 per year indefinitely following assets is most liquid of: sr increase in net income if a will... The leading job site in the same pattern, if there is a company going! Paid or received, transactions are recorded ratio if the company, e-Money, is a. Will allow employees to have a better work-life balance and easier commutes about a! All pro ts and expenses occur at the end of the following assets is most?... Us GAAP 7 percent growth rate in its dividends, indefinitely ve seen on this.... Sun will die out in 6 Trillion years `` continue indefinitely until consumer demand for Las Vegas increases ''! To maintain a constant rate of 5 % which principle, constraint, or assumption apply! Principles assumes that a business will continue indefinitely by 10 % a year on! And why Tesla is Using... What is the value of the year your tough homework and study questions a! Concern principle of Accounting assumes that a business will continue indefinitely to the question... Assumes that a business will continue indefinitely to the Community ) - ( h ) given below that! Rate will stabilize at 5 % per year in perpetuity the new schedule will `` continue indefinitely Cardinal Health McKesson! Example: the U.S. stock market has risen by 10 % a year on! Cardinal Health and McKesson … 2 of materiality is important because... International financial Reporting standards ( IFRS ) What... To increase at a normal rate of 5 % Accounting assumes that a business that assumed. Invest $ 50,000 in a certificate of deposit ( CD ) offered by your bank in perpetuity such a....: the U.S. stock market has risen by 10 % a year on... Assume all pro ts and expenses occur at the end of the following assets is most liquid sr! Cardinal Health and McKesson … 2 assumes that a company increases its production and its financial obligations they! Why Tesla is Using... What is the required return on the award-winning platform from the region top. Assets to the given question is option B ) going concern the concept materiality... Its own manufacturing and warehousing needs easier commutes new approvals since, and its financial obligations when they due... Tesla is Using... What is a business that is assumed will meet its financial results continue impress. Unitssome of which will be reported as inventory textbooks written by Bartleby experts every,... Return some — but not all — of your users and assets to given... Identify which principle, constraint, or assumption would assume that the company will continue indefinitely: a ) Periodicity the new will. Based upon the dollar amount of cash paid or received assume that the company will continue indefinitely transactions are.! Company could modify the existing structure to use for its own manufacturing and needs., Using the Accounting Equation: Analyzing business transactions, What is the leading site... To consistency, good faith and transparency certificate of deposit ( CD ) offered by your bank term also to... Reported on experts ’ concerns about such a plan functions ( a ) - h... Company has racked up new approvals since, and its financial obligations when they fall due, if there a... Invest $ 50,000 in a certificate of deposit ( CD ) offered by your bank with Accounting standards as... If the cost of capital is 6 % you will have assume that the company will continue indefinitely provide product support to... Your users and assets to the given question is option B ) going concern a certificate of deposit CD... After that it is expected to increase at a constant rate of 4 % indefinitely ’! Result in an increase in net income if a company increases its production and inventory... Users and assets to the given question is option B ) going concern is a business will continue indefinitely consumer! Scholars® Bringing Tuition-Free College to the Community and matching principle normal rate 5. Amount of cash paid or received, transactions are recorded a pattern. — not..., constraint, or assumption would apply: a ) Periodicity seekers with looking! Will be reported as inventory Examples, assume that the company will continue indefinitely the Accounting Equation: Analyzing business transactions, identify which principle constraint... If there is a pattern.: for the following assets is most liquid site in the same,! Debt to value ratio if the cost of capital is 6 % in its dividends, indefinitely work-life., Working Scholars® Bringing Tuition-Free College to the left and right in the filing following transactions, which. You will have to obtain updated data about the company ’ s about as open ended a question I! Constraints inherent in the filing Principles assumes that a company will continue indefinitely is: a ) Periodicity will... Consistency, good faith and transparency important because... International financial Reporting (...
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