Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $7.4 million. The machinery can be sold to the Romulans today for $4.15 million. Klingon's current balance sheet shows net fixed assets of $3.45 million, current liabilities of $1.6 million, and net working capital of $540,000. If all the current assets were liquidated today, the company would receive $1.3 million cash. Calculate the Book Value and Market Value of current assets and net fixed assets.

(a) $2.14 million; $3.45 million

(b) $1.3 million; $4.15 million

Explanation:

Given that,

(a) Book value of current assets = Net working capital + current liability

                                                     = $0.54 million + $1.6 million

                                                     = $2.14 million

Total book value of current and net fixed assets:

= Book value of current assets + Book value of net fixed assets

= $2.14 million + $3.45 million

= $5.59 million

(b) Market value of current assets:

= Cash value of all the current assets today

= $1.3 million

Market value of net fixed assets:

= Selling value of machinery today

= $4.15 million

Total market value:

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

= $1.3 million + $4.15 million

= $5.45 million

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