In accounting for tangible operational assets,the continuity assumption is important because of which of the following?
A)It helps a company decide whether to use straight-line depreciation or an accelerated depreciation method.
B)It justifies depreciating the asset over its expected useful life,without anticipating that the business will liquidate in the near future.
C)It provides justification for including residual values in calculating depreciation.
D)It is consistent with maintaining assets in the accounting records at market value rather than acquisition cost.

Question

Quizplus · Accepted Answer

The continuity assumption assumes that the business will continue to operate in the foreseeable future. This allows the company to justify depreciating the asset over its expected useful life. Without this assumption, the business may need to liquidate assets and the depreciation expense would need to be accelerated, which would not accurately reflect the true depreciation of the asset. Therefore, choice B is the best answer. None of the other choices directly relate to the continuity assumption.

In Accounting for Tangible Operational Assets,the Continuity Assumption Is Important