Monetary Unit Assumption: Definition & Examples

Instructions:

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question 1 of 3

According to the monetary unit assumption, what criterion must be satisfied for a company to record a business transaction?

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1. Which of the following is NOT an advantage of using the monetary unit assumption?

2. Calculate the total amount the company would have in its vehicle account after it applies the monetary unit assumption to a new purchase given the following information: company vehicle purchased five years ago for $15,000; value of company vehicle purchased five years ago in today's dollars is $11,500; new company vehicle purchased this month for $22,700.

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About This Quiz & Worksheet

This brief quiz and worksheet will assess your understanding of the monetary unit assumption. Passing the quiz will require you to be familiar with inflation.

Quiz & Worksheet Goals

Here are the concepts the quiz will assess:

  • Criterion required by the monetary unit assumption for a company to record a business transaction
  • Advantages of using the monetary unit assumption
  • Calculating a company's vehicle account balance after applying the monetary unit assumption
  • Maintaining financial records when applying the monetary unit assumption
  • Definition of inflation

Skills Practiced

  • Knowledge application - use your knowledge to answer questions about monetary unit assumption
  • Information recall - access the knowledge you've gained regarding benefits of using the monetary unit assumption
  • Interpreting information - verify that you can read information regarding how to calculate a company's vehicle account balance and interpret it correctly

Additional Learning

Continue to strengthen your knowledge of this topic by reviewing the related lesson titled Monetary Unit Assumption: Definition & Examples. Here's a snapshot of what the lesson covers:

  • Problems with monetary unit assumption
  • False impression of the value of assets
  • Adjusting for change in the value of a dollar
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