Figure 13-1 Bestor Travel Inc.Balance Sheet
Suppose you were fortunate on the timing of your property investment and the firm's property is now worth $750,000.An investor has offered you $100,000 for the patent.Further,some of the firm's inventory has become obsolete and is now worth only $180,000.
-Assume the information in Figure 13-1 is correct,EXCEPT the market value of property is now estimated to be $450,000.Use the Book value Plus Adjustment method along with the information from 13-1 and the new estimated value of property to value the firm's equity.
A)$1,100,000
B)$1,200,000
C)$1,300,000
D)$1,400,000

Question

Figure 13-1 Bestor Travel Inc.Balance Sheet
  Suppose you were fortunate on the timing of your property investment and the firm's property is now worth $750,000.An investor has offered you $100,000 for the patent.Further,some of the firm's inventory has become obsolete and is now worth only $180,000.
-Assume the information in Figure 13-1 is correct,EXCEPT the market value of property is now estimated to be $450,000.Use the Book value Plus Adjustment method along with the information from 13-1 and the new estimated value of property to value the firm's equity.
A)$1,100,000 
B)$1,200,000 
C)$1,300,000 
D)$1,400,000

Quizplus · Accepted Answer

The Book Value Plus Adjustment method takes the book value of equity and adds or subtracts the difference between the market value and book value of assets. In this case, the market value of property is now estimated to be $450,000, which is $100,000 more than the book value of $350,000. Therefore, we add $100,000 to the book value of equity of $1,100,000 to get a value of $1,200,000.