S 1 – 4 (L earn i ng Obj ec tiv e 2: Exp la i n u nderly i ng acco u n ti ng conce pt s, ass umpti o

S1-4 (Learning Objective 2: Explain underlying accounting concepts, assumptions, and principles of accounting) David Newberry is chairman of the board of Healthy Food Brands, Inc. Suppose Mr. Newberry has just founded Healthy Food Brands, and assume that he treats his home and other personal assets as part of Healthy Food Brands. Answer these questions about the evalua- tion of Healthy Food Brands, Inc.

1.  Which accounting assumption governs this situation?

2.    How can the proper application of this accounting assumption give Newberry and others a

realistic view of Healthy Food Brands, Inc.? Explain in detail.