Which of the Following Would Violate the Economic Entity Concept

question 149

Multiple Choice

Which of the following would violate the economic entity concept?

• A) reporting amounts owed to the company's suppliers as a liability on the balance sheet.
• B) reporting equipment owned and used in the business as an asset in the balance sheet.
• C) reporting withdrawals by the owner as a drawing in the statement of owner's equity.
• D) reporting the owner's personal sailboat as an asset on the balance sheet.

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Definitions:

Contract Interest Rate

The interest rate specified in a loan or bond agreement, which determines the amount of interest the borrower will pay over the term of the loan.

Face Value

The nominal or dollar value printed on a financial instrument, such as a bond or stock certificate, representing its legal value.

Long-Term Liabilities

Financial obligations of a company that are due beyond one year, including bonds payable, long-term leases, and pension obligations.

Debt Financing

The process of raising capital through the sale of bonds, bills, or notes to individuals or institutions.