Lindsey Smith decided to start her own CPA practice as a professional corporation, Smith CPA Ltd. 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?

Question

Quizplus · Accepted Answer

The cost principle states that assets should be recorded at their cost at the time of purchase, not at their current market value. Lindsey's corporation should record the building at the purchase price of $35,000, not $50,000.

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