Question

Klingon Cruisers, Inc., purchased new cloaking machinery four years ago for $15 million. The machinery can be sold to the Romulans today for $14.2 million. Klingon’s current balance sheet shows net fixed assets of $12 million, current liabilities of $880,000, and net working capital of $225,000. If all the current assets were liquidated today, the company would receive $1.07 million cash.

What is the book value of Klingon’s total assets today? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).) Book value of total assets $

What is the market value of Klingon's total assets today? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).) Market value of total assets $

Answer 1

1. $13,105,000
2. $15,270,000

Step-by-step explanation:

Book Value

This uses the balance sheet amounts which makes it internal unlike market which is external.

Total Assets = Fixed assets + Current Assets

Net Working Capital = Current Assets - Current Liabilities

Current Assets = Net Working Capital + Current Liabilities

= 880,000 + 225,000

= $1,105,000

Total Assets = 12,000,000 + 1,105,000

= $13,105,000

Market Value

This refers to how much the market values the asset i.e. how much it can sell for.

Total Assets = Fixed + Current

= 14,200,000 + 1,070,000

= $15,270,000