PRC-1 · Chapter 6 · Question 100 of 100
Which of the following is the fundamental basis for the 'Going Concern' concept regarding PPE?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It assumes the business will continue in operation for the foreseeable future, justifying the depreciation of assets over a long useful life instead of immediate liquidation.
Explanation
The going concern concept presumes the entity will not liquidate. Without it, assets would have to be valued at their immediate break-up or forced-sale values, rendering systematic long-term depreciation meaningless.
More Property, Plant and Equipment MCQs
- Q2Which of the following assets should NOT be classified as Property, Plant, and Equipment?
- Q3At what point should an entity COMMENCE the depreciation of an item of property, plant, and equipment?
- Q4Which of the following costs should be EXCLUDED from the initial capitalized cost of a newly acquired machine?
- Q5How should refundable sales taxes (e.g., input VAT) paid on the purchase of a non-current asset be treated in the accounting records?
- Q6Which of the following is considered a 'Capital Expenditure'?