Klingon Widgets, Inc., purchased new cloaking machinery five years ago for $5 million. The machinery can be sold to the Romulans today for $4.5 million. Klingon’s current balance sheet shows net fixed assets of $3.5 million, current liabilities of $750,000, and net working capital of $229,000. If all the current assets and current liabilities were liquidated today, the company would receive $1.11 million cash. a. What is the book value of Klingon’s total assets today? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) b. What is the sum of the market value of NWC and the market value of fixed assets? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Klingon Widgets, Inc., purchased new cloaking machinery five years ago for $5 million. The machinery can be sold to the Romulans today for $4.5 million. Klingon’s current |
| a. | What is the book value of Klingon’s total assets today? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) |
| b. | What is the sum of the market value of NWC and the market value of fixed assets? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) |
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