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:

Conditioned Response

A learned response to a previously neutral stimulus after it has been repeatedly associated with an unconditioned stimulus.

Classical Conditioning

A training technique in which two stimuli are paired repeatedly; the response initially caused by the second stimulus becomes triggered by the first stimulus after some time.

Conditioned Response

A learned response to a previously neutral stimulus after it has been repeatedly paired with an unconditioned stimulus.

Unconditioned Stimulus

A stimulus that naturally and automatically triggers a response without prior learning or conditioning.