Klingon Widgets, Inc., purchased new cloaking machinery five years ago for $5 mi
ID: 2799237 • Letter: K
Question
Klingon Widgets, Inc., purchased new cloaking machinery five years ago for $5 million. The machinery can be sold to the Romulans today for $4.1 million. Klingon’s current balance sheet shows net fixed assets of $2.8 million, current liabilities of $720,000, and net working capital of $217,000. If all the current accounts were liquidated today, the company would receive $0.99 million cash. 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.) Book value of total assets $ What is the sum of the market value of NWC and the market value of fixed assets? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) Sum of the market value of NWC and market value of fixed assets $
Explanation / Answer
Answer a.
Book Value:
Working Capital = $217,000
Current Liabilities = $720,000
Working Capital = Current Assets - Current Liabilities
$217,000 = Current Assets - $720,000
Current Assets = $937,000
Total Assets = Current Assets + Net Fixed Assets
Total Assets = $937,000 + $2,800,000
Total Assets = $3,737,000
Answer b.
Market Value:
Market value of Fixed Assets = $4,100,000
Market Value of NWC = $990,000
Market Value = Market value of NWC + Market value of Fixed Assets
Market Value = $990,000 + $4,100,000
Market Value = $5,090,000
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