Klingon Widgets, Inc., purchased new cloaking machinery five years ago for $20 million. The machinery can be sold to the Romulans today for $18 million. Klingon’s current balance sheet shows net fixed assets of $15.5 million, current liabilities of $700,000, and net working capital of $226,000. If all the current assets were liquidated today, the company would receive $1.08 million cash.
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| What is the book value of Klingon’s total assets today? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) |
| Book value of total assets | $ |
| What is the sum of net working capital and the market value of fixed assets? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) |
| Sum of NWC and market value of fixed assets | $ |
| To find the book value of current assets, we use: NWC = CA – CL. Rearranging to solve for current assets, we get: |
| CA = NWC + CL |
| CA = $226,000 + 700,000 |
| CA = $926,000 |
| The market value of current assets and fixed assets is given, so: |
| Book value CA | $ | 926,000 | NWC | $ | 1,080,000 | |
| Book value NFA | 15,500,000 | Market value NFA | 18,000,000 | |||
| Book value assets | $ | 16,426,000 | Total | $ | 19,080,000 | |
this was very helpful, thank you!
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