Lindsey Smith Decided to Start Her Own CPA Practice as a Professional

question 71

Multiple Choice

Lindsey Smith decided to start her own CPA practice as a professional corporation,Smith CPA PC.Her corporation purchased an office building for $35,000 which her real estate agent said was worth $50,000 in the current market.The corporation records the building as a $50,000 asset because Lindsey believes that is the real value of the building.Which of the following concepts or principles of accounting is being violated?

• A) Cost principle
• B) Entity concept
• C) Stable monetary unit concept
• D) Going-concern concept

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Definitions:

Managerial Personnel

Employees who are responsible for making key decisions and overseeing the operations of a company, including executives and departmental managers.

Asset Revaluation Surplus

The increase in value of an asset, reflected on a company's financial statements, after it has been revalued to its current market value.

General Reserve

Funds set aside by a company from its profits for general unspecified future risks or obligations.

Amortisation of Goodwill

The gradual write-off of the purchased goodwill of a company over time, reflected as a non-cash expense in the income statement.