Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $6.1 million. The machinery can be sold to the Romulans today for $4 million. Klingon's current balance sheet shows net fixed assets of $3.1 million, current liabilities of $2.4 million, and net working capital of $460,000. If all the current assets were liquidated today, the company would receive $1.25 million cash.
| Required: | |||
| (a) |
What is the book value of Klingon's assets today?
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| A. BOOK VALUE OF TOTAL ASSETS | ||||
| Book value of Fixed assets | 3,100,000 | |||
| Add: Book value of Current Assets | 700,000 | |||
| Working Capital | 460,000 | |||
| Add: Current Liabilities | 240,000 | |||
| Total Book value of Assets | 3,800,000 | |||
| B. MARKET VALUE OF ASSETS: | ||||
| Realizable value of fixed assets to Romulans | 4,000,000 | |||
| Add: Realisable value of current assets | 1,250,000 | |||
| Total Mmarket value of Total assets | 5,250,000 | |||
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