Question

Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell her business. The company built a building at a cost of $1,240,000 that is currently appraised at $1,440,000. The equipment originally cost $720,000 and is currently valued at $467,000. The inventory is valued on the balance sheet at $410,000 but has a market value of only one-half of that amount. The owner expects to collect 98 percent of the $225,200 in accounts receivable. The firm has $10,500 in cash and owes a total of $1,440,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm?

a. $1,333,396
b. $672,000
c. $1,108,196
d. $903,196
e. $1,743,396

Answer 1

d. $903,196

Step-by-step explanation:

Particulars Amount

Current value of equipment $467,000

Market value of inventory $205,000 ($410,000*1/2)

Cash in hand $10,500

98% of debtors $220,696 ($225,200*98/100)

Less; Owings ($14,40,000

Net market value of firm $903,196