Question

Klingon Widgets, Inc., purchased new cloaking machinery four years ago for $8 million. The machinery can be sold to the Romulans today for $7.3 million. Klingonâs current balance sheet shows net fixed assets of $6 million, current liabilities of $760,000, and net working capital of $219,000. If all the current assets were liquidated today, the company would receive $1.01 million cash.

1. What is the book value of Klingonâs total assets today? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
2. 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.)

Answer 1

Net working capital = Current assets - Current liabilities

$219,000 = Current assets - $760,000

Current assets = $219,000 + $760,000

Current assets = $979,000

1. Total assets = Current assets + Net fixed assets

Total assets = $979,000 + $6,000,000

Total assets = $6,979,000

So, the book value of Klingonâs total assets today is $6,979,000.

2. Sum of net working capital and the market value of fixed assets:

= Market value of current assets + Market value of fixed assets

= $1,010,000 + $7,300,000

= $8,310,000