Question

Klingon Widget Inc. purchased new cloaking machinery three years ago for 6 million dollars. The machinery can be sold to the Romulans today for 4.8 million dollars. Klingons current balance sheet shows net fixed assets of 3.3 million dollars, current liabilities of 850,000 dollars, and net working capital of 220,000 dollars. If all the current accounts were liquidated today, the company would recieve 1.05 million dollars cash. What is the book value of Klingons total assets today? What is the sum of the net working capital AND the market value of fixed assets.

Please show step by step on how to answer this.

Answer 1

Solution:
a.	The book value of Klingon's assets today = $4,370,000
Working Notes:
	The book value of Klingon's assets today = Book value Current assets + Book value of Net fixed assets
	Net working capital = Current assets - Current liabilities
	Book value of Current assets =Net Working Capital + Current liabilities
	= $220,000 + $850,000
	= $1,070,000
	Book value of net fixed assets = $3,300,000
	The book value of Klingon's assets today = Book value Current assets + Book value of Net fixed assets
		= $1,070,000 + $3,300,000
		=$4,370,000
b.	The Market value of Klingon's assets today = $5,850,000
Working Notes:
	The Market value of Klingon's assets today = Market value Current assets + Market value of Net fixed assets
		= $1,050,000+ $4,800,000
		=$5,850,000
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