Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Fundamental Accounting Equation

Financial Accounting

1. Introduction to Accounting

Fundamental Accounting Equation

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Multiple Choice

Which one of the following statements regarding the book value of an asset is correct?

The book value of an asset increases over time as depreciation is recorded.

The book value of an asset is the amount the company expects to receive when selling the asset.

The book value of an asset is always equal to its current market value.

The book value of an asset is calculated as its original cost minus accumulated depreciation.

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Verified step by step guidance

Step 1: Understand the concept of 'book value' in financial accounting. The book value of an asset represents its value on the company's accounting records, calculated as the original cost of the asset minus accumulated depreciation.

Step 2: Recall that depreciation is the systematic allocation of the cost of an asset over its useful life. As depreciation is recorded, the accumulated depreciation increases, reducing the book value of the asset over time.

Step 3: Clarify that the book value is not the same as the market value. The market value is the price at which the asset could be sold in the open market, which may differ from the book value due to market conditions or other factors.

Step 4: Note that the book value does not represent the amount the company expects to receive when selling the asset. Instead, it is purely an accounting measure based on historical cost and depreciation.

Step 5: Conclude that the correct statement is: 'The book value of an asset is calculated as its original cost minus accumulated depreciation.' This aligns with the definition and accounting treatment of book value.