This is not true is it?

Question

The cost and fair market value of an asset are the same at the time of acquisition and in all subsequent periods.

Answer 1

Yes and No.

Case in point.  Your business buys a car for $25,000 and keeps it for five years.  

What is the fair market value?  No, I don't know, but I do know it is a lot less than $25,000.

On the other hand the cost was and is $25,000.  The cost does not change over the life of the asset.

In fact if you look at the accounting entries for the asset you will see the asset carried at original cost and a separate line entry "contra" entry for depreciation on the asset.  The current book value is the original cost less the accumulated depreciation.

To further confuse the issue the fair market value and the book value may be quite different.

Hope this helps

Jerry-the-bookkeeper

Answer 2

http://en.wikipedia.org/wiki/Fair_market...