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White raven [17]
2 years ago
14

Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell her business. The company built a

building at a cost of $1,240,000 that is currently appraised at $1,440,000. The equipment originally cost $720,000 and is currently valued at $467,000. The inventory is valued on the balance sheet at $410,000 but has a market value of only one-half of that amount. The owner expects to collect 98 percent of the $225,200 in accounts receivable. The firm has $10,500 in cash and owes a total of $1,440,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm?
Business
1 answer:
Sladkaya [172]2 years ago
5 0

Answer:

Net market value of firm = $903,196

Explanation:

Items to determine the Market value of the firm are as below

 Item                                        Amount

Current value of building        $1,440,000

Current value of equipment    $467,000

Market value of inventory       $205,000

Cash in hand                            $10,500

98% of debtors                         $220,696

Less: Owings                           -<u>$1,440,000</u>

Net market value of firm        <u>$903,196</u>

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Prepare journal entries to record the issuance of the bonds and the retirement of bonds. (Show computations and round to the n..
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Answer:

issuance entry:

cash                   2,850,000 debit

discount on BP     150,000 debit

         bonds payable           3,000,000 credit

--to record issuance--

bonds payable      600,000 debit

loss on redemption 30,000 debit

interest expense     56,250 debit

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Explanation:

proceeds at issuance : $3,000,000 x 95/100 = 2,850,000

the difference will be the discount.

Now, when the bonds are retired we have to check the weight:

3,000,000 --> 120,000

  600,000 --> 120,000/3,000,000 x 600,000 = 24,000

<u><em>cash outlay</em></u> 600,000 x 101/100 = 606,000

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