Juan\'s Inc., purchased new cloaking machinery three years ago for $6.3 million.
ID: 2812777 • Letter: J
Question
Juan's Inc., purchased new cloaking machinery three years ago for $6.3 million. The machinery can be sold to the Nick's today for $4.55 million. Juan's current balance sheet shows net fixed assets of $3 million, current liabilities of $2 million, and net working capital of $420,000. If all the current assets were liquidated today, the company would receive $1.4 million cash.
Juan's Inc., purchased new cloaking machinery three years ago for $6.3 million. The machinery can be sold to the Nick's today for $4.55 million. Juan's current balance sheet shows net fixed assets of $3 million, current liabilities of $2 million, and net working capital of $420,000. If all the current assets were liquidated today, the company would receive $1.4 million cash.
Explanation / Answer
Answer a.
Current Assets = Net Working Capital + Current Liabilities
Current Assets = $420,000 + $2,000,000
Current Assets = $2,420,000
Book Value of Assets = Net Fixed Assets + Current Assets
Book Value of Assets = $3,000,000 + $2,420,000
Book Value of Assets = $5,420,000
Answer b.
Market Value of Fixed Assets = $4,550,000
Market Value of Current Assets = $1,400,000
Market Values of Firm = Market Value of Fixed Assets + Market Value of Current Asstes
Market Values of Firm = $4,550,000 + $1,400,000
Market Values of Firm = $5,950,000
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