Question

Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $6.2 million. The machinery can...

Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $6.2 million. The machinery can be sold to the Romulans today for $3.95 million. Klingon's current balance sheet shows net fixed assets of $3.5 million, current liabilities of $2.1 million, and net working capital of $500,000. If all the current assets were liquidated today, the company would receive $1.75 million cash.
Required:
(a) What is the book value of Klingon's assets today?
(b) What is the market value?
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Homework Answers

Answer #1

Answer to a

Book Value of Klingon Assets Today = Book Value of Net Fixed Assets + Book Value of Total Current Asset

Now, Total Current Assets = Net Working Capital + Current Liability

Book Value of Klingon Assets Today = $ 3.5 Million + $ 500000 + $ 2.1 Million = $ 6100000

Answer to b

Market Value of Klingons Assets = Market Value of Fixed Assets + Market Value of Current Assets

Market Value = Value of Asset if sold Today

Market Value of Klingons Assets =  $ 3.95 Million + 1.75 Million = $ 5.7 Million

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