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8 December, 16:01

Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $5.0 million. The machinery can be sold to the Romulans today for $7.2 million. Klingon's current balance sheet shows net fixed assets of $3.8 million, current liabilities of $810,000, and net working capital of $140,000. If all the current accounts were liquidated today, the company would receive $925,000 cash.

What is the book value of Klingon's total assets today?

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

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  1. 8 December, 16:52
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    1. The book value of Klingon's total assets = $4,750,000.

    2. The sum of the NWC and market value of fixed assets = $8,125,000.

    Explanation:

    Requirement 1

    We know,

    The book value of Klingon's total assets = Net fixed assets + current asset

    Given,

    Net fixed assets = $3,800,000 million

    Again we know,

    Net working capital = current asset - current liabilities

    Current asset = $140,000 + $810,000

    Current asset = $950,000

    Putting the values into the formula, we will get

    The book value of Klingon's total assets = Net fixed assets + current asset

    The book value of Klingon's total assets = $3,800,000 + $950,000

    The book value of Klingon's total assets = $4,750,000

    Requirement 2

    We know,

    The sum of the net working capital (NWC) and the market value of fixed assets = liquidated net working capital + market values of net fixed assets.

    Given,

    Liquidated net working capital = $925,000

    Market values of net fixed asset = $7,200,000

    Putting the values into the formula, we will get

    The sum of the NWC and market value of fixed assets = liquidated net working capital + market values of net fixed assets.

    The sum of the NWC and market value of fixed assets = $925,000 + $7,200,000.

    The sum of the NWC and market value of fixed assets = $8,125,000
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