Question

Emily owns three businesses: a dry cleaner, a market, and a candy store. The dry cleaner has revenue of $5,000; the market has revenue of $10,000; and the candy store has revenue of $7,000. Under the business entity assumption, Emily should record:_______.

A) $22,000 of revenue in her personal records.
B) $22,000 of revenue in the records of the dry cleaners.
C) $22,000 of revenue in the records of the market.
D) None of these choices are correct.

Answer 1

The correct answer is option (D).

Step-by-step explanation:

According to the scenario, the most appropriate answer is option (D) because a business entity assumption can be defined as the transaction of each business that should be filed separately. It must exclude any personal transaction done by the owner or owner's other business.

While the other options are wrong because of the following reasons:

• Option (A) is wrong because it shows $22,000 in the personal record which is not a business entity assumption.

• Option (B) is wrong because it shows $22,000 in dry cleaners while $22,000 is the sum of all three businesses.

• Option (C) is wrong because it shows $22,000 in the market while $22,000 is the sum of all three businesses.