The amount by which the cost of an asset exceeds its accumulated depreciation is called:a. Net incomeb. Book valuec. Fair valued. Market value
Question
The amount by which the cost of an asset exceeds its accumulated depreciation is called:
- a. Net income
- b. Book value
- c. Fair value
- d. Market value
Solution
Break Down the Problem
- Identify the key concepts in the question regarding asset valuation and depreciation.
- Recognize the definitions of the terms provided in the options.
Relevant Concepts
- Accumulated Depreciation: The total amount of depreciation expense that has been allocated to an asset since it was put into use.
- Book Value: The value of an asset according to its balance sheet, calculated as the original cost minus accumulated depreciation.
- Fair Value: The price that an asset would fetch in the market.
- Market Value: The actual price for which an asset can be sold in the current market.
Analysis and Detail
The question asks for the term that describes the excess of the cost of an asset over its accumulated depreciation. By definition: Hence, the amount by which the cost of an asset exceeds its accumulated depreciation is indeed termed as "Book Value."
Verify and Summarize
- The other options do not represent the difference between cost and accumulated depreciation. Net income relates to profitability, fair value refers to market pricing under certain conditions, and market value depends on the current selling price.
Final Answer
b. Book value
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