In Accounting for Tangible Operational Assets, the Continuity Assumption Is

question 32

Multiple Choice

In accounting for tangible operational assets, the continuity assumption is important because of which of the following?

• A) It is consistent with maintaining assets in the accounting records at market value rather than acquisition cost.
• B) It provides justification for including residual values in calculating depreciation.
• C) It helps a company decide whether to use straight-line depreciation or an accelerated depreciation method.
• D) It justifies depreciating the asset over its expected useful life, without anticipating that the business will liquidate in the near future.

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Definitions:

Standard Quantity

The expected or planned amount of materials or inputs required for the production of a unit of product, based on efficient operations.

Actual Quantity

The real amount or volume of inputs used in the production process, as opposed to the amount budgeted or planned.

Standard Cost Card

A detailed listing of the standard amounts of inputs and their costs that are required to produce one unit of a specific product.

Variable Cost

Costs that change in proportion to changes in the volume of output or activity.