Klingon Widgets Inc purchased new cloaking machinery three y

Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $12 million. The machinery can be sold to the Romulans today for $11 million. Klingon’s current balance sheet shows net fixed assets of $9 million, current liabilities of $800,000, and net working capital of $221,000. If all the current accounts were liquidated today, the company would receive $1.03 million cash.

a. What is the book value of Klingon’s total assets today?

b.What is the sum of the market value of NWC and the market value of fixed assets?

Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $12 million. The machinery can be sold to the Romulans today for $11 million. Klingon’s current balance sheet shows net fixed assets of $9 million, current liabilities of $800,000, and net working capital of $221,000. If all the current accounts were liquidated today, the company would receive $1.03 million cash.

Solution

a) Book value of current assets = Net working capital+Current liabilities = 221000+800000 = $     1,021,000 Total assets = Net fixed assets+Current assets = 1021000+9000000 = $   10,021,000 Book value of total assets $   11,042,000 b) Market value of fixed assets $   11,000,000 Market value of NWC = Market value of current assets-Current liabilities = 1030000-800000 = $         230,000 Market value of NWC+Market value of fixed assets $   11,230,000