Jake owns The Corner Market which he is trying to sell so that he can retire and

Question

Jake owns The Corner Market which he is trying to sell so that he can retire and travel. The Corner Market owns the building in which it is located. This building was built at a cost of $647,000 and is currently appraised at $819,000. The counters and fixtures originally cost $148,000 and are currently valued at $65,000. The inventory is valued on the balance sheet at $319,000 and has a retail market value equal to 1.2 times its cost. Jake expects the store to collect 98 percent of the $21,700 in accounts receivable. The firm has $26,800 in cash and has total debt of $414,700. What is the market value of this firm?

$857,634 $900,166 $919,000 $1,314,866 $1,333,700

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Option B ($900166) is the correct answer.

Thanks.

Market value of building 819000 Market value of counter and fixtures 65000 Retail price of inventory (319000*1.20) 382800 Collection from accounts receivables (21700*98%) 21266 Cash available 26800 Total value of assets 1314866 Less: Total debt 414700 Market value 900166

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