PP&E at Historical Cost

This problem practices the basic accounting rule that PP&E on a GAAP balance sheet is carried at net historical cost, not current fair market value. A candidate has to understand how accumulated depreciation reduces the original purchase price to arrive at the book value reported on the balance sheet, and why an asset’s market value does not automatically change that reported number. Interviewers ask this kind of question to check whether you know the difference between book value and market value, and whether you understand core accrual accounting concepts that show up throughout financial statement analysis.