Question

Tate Corporation purchased a building for its grocery store for $30,000 in 1970.Based on inflation estimates,the amount of this asset has been adjusted in the accounting records.The building is now reported at $75,000.Which of the following concepts or principles of accounting is being violated?

A) Going-concern concept
B) Stable monetary unit concept
C) Entity concept
D) None of the above

Answer 1

B) Stable monetary unit concept

Step-by-step explanation:

Based on the information given the concepts or principles of accounting that was being violated is called STABLE MONETARY UNIT CONCEPT reason been that this type of accounting principle believe that the dollar purchasing power should often be stable or fixed regardless of the increase or rise in market price which is inflation which is why an accountant will often ignore the impact of inflation on goods and services based on the assumption of the principle of STABLE MONETARY UNIT CONCEPT.

Therefore Tate corporation has violated the accounting principle of STABLE MONETARY UNIT CONCEPT by adjusting the building amount that was purchase in 1970 in the Accounting record from the amount of $30,000 to the amount of $75,000 due to the effect of inflation.