Question

The book value of current assets plus the net book value (NBV) of long-lived assets is defined as __________ cost.

Option 1:
Historical cost

Option 2:
Fair market value

Option 3:
Replacement cost

Option 4:
Book value cost

Answer 1

The correct answer is Option 4, book value cost, which represents the sum of the book value of current assets and the net book value of long-lived assets recorded on a company's balance sheet.

Step-by-step explanation:

The book value of current assets plus the net book value (NBV) of long-lived assets is defined as book value cost. When these assets are reported on a company's balance sheet, they are typically recorded at their historical cost and then adjusted for depreciation, amortization, or impairment where applicable. This measure does not reflect the fair market value, as the assets are not adjusted to their current selling price, nor the replacement cost, as the costs to replace the assets at current prices are not considered. Therefore, Option 4, book value cost, is the correct answer.