Klingon Widgets, Inc., purchased new cloaking machinery four years ago for $12 m
ID: 2659447 • Letter: K
Question
Klingon Widgets, Inc., purchased new cloaking machinery four years ago for $12 million. The machinery can be sold to the Romulans today for $10.8 million. Klingons current balance sheet shows net fixed assets of $10 million, current liabilities of $850,000, and net working capital of $249,000. If all the current assets were liquidated today, the company would receive $1.16 million cash.
Klingon Widgets, Inc., purchased new cloaking machinery four years ago for $12 million. The machinery can be sold to the Romulans today for $10.8 million. Klingons current balance sheet shows net fixed assets of $10 million, current liabilities of $850,000, and net working capital of $249,000. If all the current assets were liquidated today, the company would receive $1.16 million cash.
Explanation / Answer
Book value is 10,000,000 - 850,000 + 249,000 + 1,160,000 = 10,559,000
Market value is 10,800,000 - 850,000 + 249,000 + 1,160,000 = 11,359,000
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