The current book value of an asset serves as the basis for determining the gain or loss at disposal.

Question

Quizplus · Accepted Answer

The book value, which is also known as the carrying value or net asset value, represents the asset's value as it appears in the financial statements, after accounting for depreciation, amortization, impairment, and other adjustments. When the asset is sold or disposed of, the gain or loss is determined based on the book value and the selling price. Specifically, if the selling price is higher than the book value, there is a gain, while if the selling price is lower than the book value, there is a loss. Therefore, the current book value is a critical parameter in calculating the gain or loss at disposal.

The Current Book Value of an Asset Serves as the Basis