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7 November, 05:01

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.

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  1. 7 November, 05:17
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    (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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