AHIP AHM-520 Question Answer
The Montvale Health Plan purchased a piece of real estate 20 years ago for $40,000. It recently sold the real estate for $80,000 and reported a capital gain of $40,000 on this sale. Even though the purchasing power of the dollar declined by half during this period and Montvale realized no actual gain in purchasing power, Montvale recorded in its accounting records the $40,000 gain from this sale. This situation best illustrates the accounting concept known as the: