Final answer:
The claim that a plant asset's book value is always equal to its fair market value is false. Book value is calculated using historical cost and accumulated depreciation, whereas fair market value reflects the current price it would sell for in the open market, which can vary.
Step-by-step explanation:
The statement that the book value of a plant asset is always equal to its fair market value is false. Book value, also known as carrying value, is the cost of the asset minus accumulated depreciation. Fair market value, on the other hand, is the price at which an asset would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. The fair market value can fluctuate based on market conditions, whereas book value is based on accounting rules and is adjusted based on an asset's depreciation schedule.
Market conditions, demand for the asset, and other factors can result in a fair market value that is significantly different from the book value. An asset may be appraised at a higher value due to demand, or the value can depreciate due to advancements in technology or other market shifts. Understanding the distinction between these two valuations is important for financial reporting and investment decisions.