Martha's Enterprises spent $2,400 to purchase equipment three years ago. This equipment is currently valued at $1,800 on today's statement of ﬁnancial position but could actually be sold for
$2,000. Net working capital is $200 and long-term debt is $800. What is the book value of
Shareholders' equity?

Question

Quizplus · Accepted Answer

The book value of shareholders' equity is found by subtracting total liabilities from total assets. The equipment's book value after three years is $1,800, but it could be sold for $2,000, so we can consider it as an asset worth $2,000. Therefore, total assets would be $2,000 (equipment) + $200 (net working capital) = $2,200. Total liabilities would be $800 (long-term debt). 
Thus, shareholders' equity would be calculated as $2,200 - $800 = $1,400, which is option D.

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