Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $4 m

Question

Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $4 million. The machinery can be sold to the Romulans today for $6.2 million. Klingon’s current balance sheet shows net fixed assets of $2.8 million, current liabilities of $710,000, and net working capital of $130,000. If all the current assets were liquidated today, the company would receive $825,000 cash.

Requirement 1:
What is the book value of Klingon’s assets today? (Do not include the dollar sign ($). Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)

Book value $

Requirement 2:
What is the market value? (Do not include the dollar sign ($). Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)

Explanation / Answer

What is the book value of Klingon’s assets today?

$2.8 million +working capital of $.13million.=2.98

What is the market value?

6.2 million+ .825million - .71 million =$ 6.315 million

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