Question

Jake owns The Corner Market which he is trying to sell so that he can retire and travel. The Corner Market owns the building in which it is located. This building was built at a cost of $647,000 and is currently appraised at $819,000. The counters and fixtures originally cost $148,000 and are currently valued at $65,000. The inventory is valued on the balance sheet at $319,000 and has a retail market value equal to 1.2 times its cost. Jake expects the store to collect 98 percent of the $21,700 in accounts receivable. The firm has $26,800 in cash and has total debt of $414,700. What is the market value of this firm?
a) $857,634
b) $900,166
c) $919,000
d) $1,314,866
e) $1,333,700

Answer 1

Answer:

b) $900,166

Explanation:

The computation of the market value of the firm is given below:

The Market value of building $819,000

Add: Market value of counter and fixtures $65,000

Add: Retail price of inventory ($319,000 × 1.20) $382,800

Add: Collection from accounts receivables ($21,700 × 98%) $21,266

Add: Cash available $26,800

Total value of assets $1314,866

Less: Total debt -$414,700

Market value $900,166