Question

Four years ago, Oman Copper purchased a machine at a cost of OMR 123,000. This equipment is currently valued at OMR 41,000 on today's balance sheet but could actually be sold for OMR 37,500. This is the only fixed asset the firm owns. Net working capital is OMR 40,000 and long-term debt is OMR 76,500. What is the book value of shareholders' equity?
Select one:

a. OMR 10,000
b. OMR 13,000
c. OMR 1,000
d. OMR 4,400
e. OMR 4,500

Answer 1

solution: Given, selling value of equipment i.e fixed assets OMR 37,500, net working capital OMR 40,000 and long term debt i.e. liabilities 76,500.

Therefore, Book value of shareholder's equity.

Book value = Total assets - Total liabilities

= (Fixed assets+Net working capital)- long term debt.

= (37,500+40,000)-76,500

=77,500-76,500

= 1,000.

Therefore the book value of shareholder's equity is OMR 1,000 of Oman copper purchase.

Summary, equity represent the ownership of assets which have liabilities carrying along it .In finance equity is also known as "net position" of company or "net assets".