Which one of the following statements concerning market and book values is correct?
A)The market value of accounts receivable is generally higher than the book value of those receivables.
B)The market value tends to provide a better guide to the actual worth of an asset than does the book value.
C)The market value of fixed assets will always exceed the book value of those assets.
D)Book values represent the amount of cash that will be received if an asset is sold.
E)The current book value of equipment purchased last year is equal to the initial cost of the equipment.

Question

Quizplus · Accepted Answer

Market value is determined by the current market conditions and investor perceptions of the asset's worth, which may be different from its initial cost or book value. Book value represents the asset's historical cost less accumulated depreciation or amortization, which may not reflect the actual value of the asset if its market value has changed. Therefore, the market value tends to provide a better guide to the actual worth of an asset than does the book value. The other statements are not necessarily true in all cases.

Which One of the Following Statements Concerning Market and Book