Question

1. Paul LeGuard, majority stockholder of Total Fitness Corp., has been applying for personal credit cards by listing the fixed assets of Total Fitness at their cost in today’s dollars (that is, adjusting for changes in purchasing power) as his personal assets.

   Which of the following accounting assumptions have been violated in the credit card applications?

   		Monetary unit, periodicity, and economic entity assumptions.
   		None of the other answer choices is correct.
   		Materiality and economic entity assumptions.
   		Monetary unit and economic entity assumptions.
   		Monetary unit and going concern assumptions.
   		Monetary unit and materiality assumptions.
   		Economic entity and going concern assumptions.
   		Periodicity and monetary unit assumptions.

Answer 1

OPTION D-------Monetary unit and economic entity assumptions.

Monetary unit and economic entity assumptions.have been violated in the credit card applications.

Since Monetary unit assumption states that value of assets and liabilties are measured and reported in terms of national monetary unit, without an adjustment for changing in purchasing power. Here , Paul LeGuard,has  listed the fixed assets of Total Fitness at their cost in today’s dollars (that is, adjusting for changes in purchasing power) .

Economic Entity assumption holds that all transactional data and assets and liabilities associated with specific entity is attributable to that specific entity only. It separates the same from its owners. Here, Paul LeGuard,has  listed the fixed assets of Total Fitness as his personal assets