Final answer:
True. Companies frequently use judgments and estimates in valuing items on the balance sheet.
Step-by-step explanation:
True. Companies often rely on judgments and estimates when valuing items on the balance sheet, especially when the value is not easily determined or is subject to change. This is known as the tendency to rely on initial values, prices, or quantities when estimating the actual value, price, or quantity of something.
For example, when valuing inventory, a company may estimate the value of its unsold goods based on historical cost or the current market price. Similarly, when estimating the value of long-term assets, such as buildings or equipment, companies often use estimates based on their useful life and expected future cash flows.