Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $3 m
ID: 2659111 • Letter: K
Question
Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $3 million. The machinery can be sold to the Romulans today for $2.5 million. Klingons current balance sheet shows net fixed assets of $2 million, current liabilities of $710,000, and net working capital of $227,000. If all the current assets were liquidated today, the company would receive $1.09 million cash.
What is the book value of Klingons total assets today? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)
What is the market value? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)
Explanation / Answer
To nd the book value of current assets, we use: NWC = CA - CL. Rearranging to
solve for current assets, we get:
CA = NWC + CL = $710K + 227K = $937M
The market value of current assets and xed assets is given, so:
Book value CA = $937K
Market value CA = $1.09M
Book value NFA = $2.0M
Market value NFA = $2.5M
Book value assets = $937K + 2.0M = 2937K
Market value assets = $1.09M + 2.5M = $3.59M
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