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 $1,170,000 that is currently appraised at $1,370,000. The equipment originally cost $650,000 and is currently valued at $397,000. The inventory is valued on the balance sheet at $340,000 but has a market value of only one-half of that amount. The owner expects to collect 98 percent of the $190,200 in accounts receivable. The firm has $11,400 in cash and owes a total of $1,370,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm? Multiple Choice $1,464,996 $1,124,996 $764,796 $934,796 $567,000

Answer 1

Answer: $764,796

Step-by-step explanation:

The market value will use the current appriased values as well as recoverable accounts.

Building = $1,370,000

Equipment = $397,000

Inventory = Half of $340,000 = $170,000

Accounts receivable = 98%* 190,200 = $186,396‬

Cash = $11,400

Debt = $1,370,000

Market Value = Assets - Liabilities

= 1,370,000+ 397,000 + 170,000 + 186,396‬ + 11,400 - 1,370,000

= $764,796‬