Book value:
A)is equivalent to market value for firms with fixed assets.
B)is based on historical cost.
C)generally tends to exceed market value when fixed assets are included.
D)is more of a financial than an accounting valuation.
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 and reflects the value of assets as recorded on the balance sheet, which may differ from their current market value. A is incorrect because market value and book value are not necessarily equivalent, particularly for firms with fixed assets whose values may have appreciated or depreciated over time. C is incorrect because book value may be lower or higher than market value. D is incorrect because book value is an accounting valuation, reflecting the value of assets as recorded on the balance sheet. E is incorrect because adjustments to book value are made only when there is a change in the value of the assets, such as depreciation or impairment, not when market value exceeds stated book value.

Book Value