Martha's Enterprises spent $2,500 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 $2,200. 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

The book value of shareholders' equity is calculated as total assets minus total liabilities. The equipment's book value is $2,000, and net working capital is $300, making total assets $2,300. Subtracting the long-term debt of $900 gives a shareholders' equity of $1,400.

Martha's Enterprises Spent $2,500 to Purchase Equipment Three Years Ago