Multiple choice

If the Going Concern concept is no longer valid, which of the following is true?

  1. All prepaid assets would be completely written off immediately.

  2. Total contributed Capital and Retained Earnings would remain unchanged.

  3. Intangible Assets would continue to be carried at net amortized historical cost.

  4. Land held as an investment would be valued at its realizable value.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Financial statements are prepared assuming that a business entity will continue to operate in the foreseeable future without the need or intention on the part of management to liquidate the entity or to significantly curtail its operational activities. If the Going Concern concept is no longer valid, all the assets would be recorded at realisable value, not at cost.

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