Question

The Widget Co. purchased all of its fixed assets three years ago for $4 million. These assets can be sold today for $2 million. The current balance sheet shows net fixed assets of $2,500,000, current liabilities of $1,375,000, and net working capital of $725,000. If all the current assets were liquidated today, the company would receive $1.9 million in cash. The book value of the total assets today is _____ and the market value of those assets is _____.

Answer 1

Answer:

The book value of the assets is $ 460,0000 and the market value of the asset is $ 390,0000

Explanation:

For calculating the book value of the asset , we will add both the fixed asset and current asset.

Fixed asset are given to us in the question as $2500,000 and current asset we will take out using the help of given current liability and net working capital ,

Net working capital = current asset - current liability

 $725,000 = current asset - $1375,000

 current asset = $725,000 + $1375,000

                        = $2100,000

Book value = fixed asset + current asset

                   = $250,0000 + $2100,000

                   = $4600,000

For taking out market value we will add the selling price of fixed asset plus value we will get by liquidating the current asset,

Market value = $2000,000 + $1900,000

                       = $3900,000