Market Values and Book Values Klingon Cruisers, Inc., purchased new cloaking mac

Question

        Market Values and Book Values Klingon Cruisers, Inc., purchased new cloaking machinery three years ago for $9.5 million. The machinery can be sold to the Romulans today for $6.5 million. Klingon's current balance sheet shows net fixed assets of $5.2 million, current liabilities of $2.4 million, and net working capital of $800,000. If all the current assets were liquidated today, the company would receive $2.6 million cash. What is the book value of Klingon's assets today? What is the market value?

Explanation / Answer

Hi,

Please find the answer as follows:

Book Value:

Fixed Assets = 5.2 million

Current Assets = 2.4+ .8 = 3.2 million

Current Liabilties = 2.4 million

Net Assets = 5.2 + 3.2 - 2.4 = 6 million

Market Value

Fixed Assets = 6.5 million

Current Assets = 2.6 million

Current Liabilties = 2.4 million

Net Assets = 6.5 + 2.6 - 2.4 = 6.7 million

Thanks.

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