Alex plc is a retailer that owns no properties and only has fixtures and fittings as non-current assets, all of which were purchased within the last six months.
The company has been experiencing trading problems for some time.
The directors have concluded that the company is no longer a going concern and have changed the basis of preparing the financial statements to a break-up (gone concern) basis.
Which ONE of the following will be the immediate effect of changing the accounting concept of Going Concern now to the break-up basis?
Select ONE answer:
- The company ceases to trade
- All fixtures and fittings are transferred from non-current to current assets
- Fixtures and fittings are valued at their historical book value
- A liquidator is appointed
Show your workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 2
- Notcorrect
- Correct ==> If a company is no longer a going concern, then the directors have concluded that it will not trade for the foreseeable future (i.e. less than twelve months) and so all non-current assets and liabilities are transferred to current assets and current liabilities respectively
- Not correct
- Not correct
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