Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $6 m
ID: 2812294 • Letter: K
Question
Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $6 million. The machinery can be sold to the Romulans today for $5.1 million. Klingon’s current balance sheet shows net fixed assets of $3.4 million, current liabilities of $895,000, and net working capital of $235,000. If the current assets and current liabilities were liquidated today, the company would receive a total of $1.15 million cash. a. What is the book value of Klingon’s total assets today? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) b. What is the sum of the market value of NWC and the market value of fixed assets? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
Explanation / Answer
Answer a.
Current Assets = Net Working Capital + Current Liabilities
Current Assets = $235,000 + $895,000
Current Assets = $1,130,000
Book Value of Assets = Net Fixed Assets + Current Assets
Book Value of Assets = $3,400,000 + $1,130,000
Book Value of Assets = $4,530,000
Answer b.
Market Value of Fixed Assets = $5,100,000
Market Value of NWC = $1,150,000
Sum of Market Values of Fixed Assets and NWC = Market Value of Fixed Assets + Market Value of NWC
Sum of Market Values of Fixed Assets and NWC = $5,100,000 + $1,150,000
Sum of Market Values of Fixed Assets and NWC = $6,250,000
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