If It Becomes Apparent to an Entity That New Events

question 27

Multiple Choice

If it becomes apparent to an entity that new events or conditions have resulted that indicate that the entity is no longer a going concern,the entity must:

• A) treat this as a non-adjusting event and discloses the reason for the breach of the going concern assumption.
• B) treat this as an adjusting event and adjust the affected accounts in the financial report.
• C) must prepare its financial report on a going concern basis and ask the auditor to indicate in the opinion the breach of the going concern basis.
• D) must prepare the financial reports adopting a fundamental change in the basis of accounting, say use of liquidation values instead of modified historical cost basis.
• E) None of the given answers.

---

Definitions:

Book Value

The value of an asset as it appears on the balance sheet, determined by cost minus accumulated depreciation.

Depreciable Cost

The cost of an asset that is subject to depreciation over its useful life, excluding any salvage value.

Double-Declining-Balance Rate

A method of accelerated depreciation where an asset's book value is reduced at double the rate of its straight-line depreciation each year.

Double-Declining-Balance Depreciation

A method of accelerated depreciation that applies twice the normal depreciation rate on the declining balance of an asset.