The Book Value of an Asset Will Equal Its Fair

question 4

Multiple Choice

The book value of an asset will equal its fair market value at the date of sale if

• A) a gain on disposal is recorded.
• B) no gain or loss on disposal is recorded.
• C) the plant asset is fully depreciated.
• D) a loss on disposal is recorded.

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Definitions:

Factory Depreciation

The allocation of the cost of a factory's physical assets over its useful life, recognizing the assets' wear and tear, deterioration, or obsolescence.

Property, Plant, and Equipment

Long-term tangible assets owned by a business, used in its operations to generate income, usually including buildings, machinery, and vehicles.

Net Operating Income

An indicator of a firm's earnings derived from its primary, ongoing business activities, not taking into account the subtraction of interest and taxes.

Retained Earnings

The portion of a company's profits that is saved or retained for reinvestment in the business, rather than being paid out as dividends to shareholders.