Book value:
A)is based on historical cost.
B)is equivalent to market value for firms with fixed assets.
C)is more of a financial than an accounting valuation.
D)generally tends to exceed market value when fixed assets are included.
E)is adjusted to market value whenever the market value exceeds the stated book value.

Question

Quizplus · Accepted Answer

Book value is based on historical cost, which is the cost of an asset at the time of acquisition. This value is reported on the balance sheet and does not reflect any changes in market value.

Answer: D 
 Book value generally tends to exceed market value when fixed assets are included, as fixed assets are typically recorded at historical cost less accumulated depreciation. Over time, the accumulated depreciation can reduce the carrying value of fixed assets to less than their market value.

Book Value