You decide to start your own business as a professional corporation. You purchase an office building for $35,000 from your mother even though your real estate agent said it was worth $500,000 in the current market. The corporation recorded the building at $500,000. Which of the following concepts or principles of accounting did the corporation violate?

Going concern assumption

money unit assumption

lower of cost of market principle

cost principle

Question

Business

Craig Hall

9 February, 21:54

You decide to start your own business as a professional corporation. You purchase an office building for $35,000 from your mother even though your real estate agent said it was worth $500,000 in the current market. The corporation recorded the building at $500,000. Which of the following concepts or principles of accounting did the corporation violate?

Going concern assumption

money unit assumption

lower of cost of market principle

cost principle

+3

Answers (1)

Know the Answer?

Christian Cameron · Answer 1

Cost principle

Explanation:

Cost principle -

It refers to the amount of the specific object to be recorded during the time of acquiring, is referred to as cost principle.

Cost principle is also called historical cost principle.

During the acquisition, the amount recorded need to be correct, any alteration in the amount leads to the violation of the cost principle.

Similar situation is showcased in the question,

Hence, from the given options the correct option is cost principle.