Problem 2-5 Market Values and Book Values [LO 11 Klingon Widgets, Inc., purchase

Question

Problem 2-5 Market Values and Book Values [LO 11 Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $5.2 million. The machinery can be sold to the Romulans today for $7.4 million. Klingon's current balance sheet shows net fixed assets of S4.0 million, current liabilities of $830,000, and net working capital of $142,000. If all the current assets were liquidated today, the company would receive $945,000 cash. (Enter your answer as directed, but do not round intermediate calculations.) Requirement 1: What is the book value of Klingon's total assets today? (Enter your answer in dollars, not millions of dollars, i e. 1,234,567.) Total asset book value Requirement 2: What is the market value of Klingon's total assets? (Enter your answer in dollars, not millions of dollars, i e. 1,234,567.) Total asset market value References eBook & Resources eBook The Balance Sheet

Explanation / Answer

Given, Net fixed assets= 4,000,000, current liabilities= 830,000 , net working capital=142,000

1. Book value of total assets= Net fixed assets+ current assets

                                               = 4,000,000 + 972,000= $4,972,000

2. Market value of total assets= 7,400,000+ 945,000 = $ 8,345,000

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