Martha's Enterprises spent $2,400 to purchase equipment three years ago.This equipment is currently valued at $2,000 on today's balance sheet but could actually be sold for $2,000.Net working capital is $300 and long-term debt is $900.Assuming the equipment is the firm's only fixed asset,what is the book value of shareholders' equity?

Question

Quizplus · Accepted Answer

Book value of shareholders' equity can be calculated as:
Total Assets - Total Liabilities

Total Assets = Value of equipment ($2,000) + Net Working Capital ($300)
Total Liabilities = Long-term debt ($900)

Therefore, book value of shareholders' equity = ($2,000 + $300) - $900 = $1,400. Hence, the correct answer is D.

Martha's Enterprises Spent $2,400 to Purchase Equipment Three Years Ago