Joshua Thomas Corporation Manufactures and Retails Computer Hardware

question 113

Multiple Choice

Joshua Thomas Corporation manufactures and retails computer hardware.The president of the corporation bought a new car as a gift for his daughter and paid for it using cash from the business.Since the corporation paid for the car,it was recorded in its books as an asset.Which of the following concepts or principles of accounting did the corporation violate?

• A)monetary unit assumption
• B)economic entity assumption
• C)cost principle
• D)going concern assumption

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Definitions:

Collateral

Property or assets pledged by a borrower to secure a loan or other credit, and subject to seizure on default.

Security Interest

A legal claim or lien on collateral that has been pledged, usually to secure repayment of a debt.

Financing Statement

A document filed by a creditor to indicate a security interest in the assets of a debtor, typically used in secured transactions.

State Agency

An organization or body created by the government to carry out specific functions on a state level.