For Each of the Assumptions Listed Below, Fill in the Appropriate

question 140

Essay

For each of the assumptions listed below, fill in the appropriate letter to indicate which of the following accounting assumptions have been violated.
a) Monetary Unit Assumption
b) Cost Principle
1. Harvester International revalues its financial statements each year to take into consideration the effects of inflation. The company justifies its decision by stating the "inflation adjusted statements more fully reflect the purchasing power of the company's earnings."
2. Ernie began operations 11 years ago and purchased land for $200,000. Ernie has since built a manufacturing plant on this land to use in daily operations. Today Ernie has appraised the value of his land to be $1.5 million. He would like the increase in the value of his land to be reported on the financial statements at $1.5 million.

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Definitions:

Fast-Second Strategies

Business tactics employed by companies to quickly follow innovators, capitalizing on the market research and initial developments made by the first movers without bearing the same risks or costs.

Dominant Firms

Companies that have a major share of the market and can significantly influence the market's dynamics.

Start-Up Firms

Are newly established businesses often characterized by innovation and scalability, typically in the technology sector, focusing on filling a niche or disrupting existing markets.

Total Cost

The overall sum of expenditures involved in manufacturing goods or providing services, incorporating both fixed and variable expenses.