The going concern assumption of GAAP implies that the firm: (a) Is going under and needs to be liquidated at historical cost.

Question:

The going concern assumption of GAAP implies that the firm:

(a) Is going under and needs to be liquidated at historical cost.

(b) Will continue to operate and its assets should be recorded at historical cost.

(c) Will continue to operate and that all assets should be recorded at their cost rather than at their liquidation value.

(d) Is going under and needs to be liquidated at liquidation value.

Answer:

One of the key assumptions under GAAP is the going concern assumption, which states that the firm:

(c) Will continue to operate and that all assets should be recorded at their cost rather than at their liquidation value.

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