The What-Not Shop owns the building in which it is located. This building initially cost $647,000 and is currently appraised at $819,000. The fixtures originally cost $148,000 and are currently valued at $65,000. The inventory has a book value of $319,000 and a market value equal to 1.1 times the book value. The shop expects to collect 96 percent of the $21,700 in accounts receivable. The shop has $26,800 in cash and total debt of $414,700. What is the market value of the shop's equity?
A) $867,832
B) $900,166
C) $695,832
D) $775,632
E) $1,190,332

Question

Quizplus · Accepted Answer

The market value of the shop's equity is calculated as follows:  Building: $819,000  Fixtures: $65,000  Inventory: $319,000 * 1.1 = $350,900  Accounts Receivable: $21,700 * 0.96 = $20,832  Cash: $26,800  Total Assets = $819,000 + $65,000 + $350,900 + $20,832 + $26,800 = $1,282,532  Equity = Total Assets - Total Debt = $1,282,532 - $414,700 = $867,832

The What-Not Shop Owns the Building in Which It Is