Asked by Erick Tshimpe on Jun 25, 2024
Verified
The net book value of a fixed asset is determined by the original cost
A) less accumulated depreciation
B) less market value
C) less accumulated depreciation plus depreciation expense
D) plus accumulated depreciation
Net Book Value
The current value of an asset or a company after subtracting total liabilities from total assets.
Accumulated Depreciation
The cumulative amount of depreciation that has been charged to a fixed asset throughout its period of use.
Original Cost
The initial expenditure involved in acquiring an asset, including purchase price, transportation, and installation.
- Grasp the concept and calculation of net book value and the impact of depreciation.
Verified Answer
MZ
Maria ZayasJun 27, 2024
Final Answer :
A
Explanation :
The net book value of a fixed asset is determined by subtracting the accumulated depreciation from the original cost. This calculation reflects the total amount of cost that has not yet been expensed and remains on the books as an asset. Market value is not used in determining net book value, nor is depreciation expense (which is used to calculate accumulated depreciation). Adding accumulated depreciation would result in a higher value than the original cost, which does not reflect the true value of the asset.
Learning Objectives
- Grasp the concept and calculation of net book value and the impact of depreciation.