Muffin's Masonry, Inc.'s balance sheet lists net fixed assets as $16 million. The fixed assets could currently be sold for $17 million. Muffin's current balance sheet shows current liabilities of $5.5 million and net working capital of $6.5 million. If all the current accounts were liquidated today, the company would receive $10.25 million cash after paying $5.5 million in liabilities. What is the book value of Muffin's Masonry's assets today? What is the market value of these assets?
A) Book Value: $28M; Market Value: $32.75M
B) Book Value: $32M; Market Value: $42.25M
C) Book Value: $32M; Market Value: $32.75M
D) Book Value: $28M; Market Value: $42.25M

Question

Quizplus · Accepted Answer

The book value of assets is the difference between the total assets and total liabilities. In this case, the total assets are $16 million + $6.5 million = $22.5 million. The total liabilities are $5.5 million. Therefore, the book value of assets is $22.5 million - $5.5 million = $17 million.The market value of assets is the amount that the assets could be sold for in the current market. In this case, the fixed assets could be sold for $17 million. Therefore, the market value of assets is $17 million.