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

question 158

Multiple Choice

Lorna Smith decided to start her own CPA practice as a professional corporation,Smith CPA PC.Her corporation purchased an office building for $35,000 that her real estate agent said was worth $50,000 in the current market.The corporation recorded the building as a $50,000 asset because Lorna 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)economic entity assumption
• C)monetary unit assumption
• D)going concern assumption

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Definitions:

Confidence

The feeling of self-assurance arising from an appreciation of one's own abilities or qualities.

Easily Distracted

A state where an individual's attention shifts frequently from one task to another with little focus.

Win-Win Solution

An outcome of a negotiation or conflict resolution where all parties involved perceive themselves as having benefited equally.

Emotional Maturity

The ability to understand, manage, and express one's emotions effectively and to handle interpersonal relationships judiciously and empathetically.