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?

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

this business is a price setter.

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