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ACC1002XFinancialAccounting

Semester2ofAcademicYear20162017
SOLUTIONStoOptionalQuestions
CHAPTER1:130,133,141,153

1-30

LIVERPOOL COMPANY
Balance Sheet
November 30, 20X1
(in pounds)
Liabilities and
Assets Stockholders Equity
Cash 18,000 (a) Liabilities:
Merchandise inventory 29,000 Accounts payable 9,000 (d)
Furniture and fixtures 8,000 Notes payable 31,000 (e)
Machinery and equip. 33,000 (b) Long-term debt payable 101,000 (f)
Land 35,000 (c) Total liabilities 141,000
Building 241,000 Stockholders equity:
Total Assets 364,000 Paid-in Capital 223,000 (g)
Total Liab & S.E. 364,000

(a) Cash: 22,000 3,000 7,000 + 6,000 = 18,000


(b) Machinery and equipment: 20,000 + 13,000 = 33,000
(c) Land: 41,000 6,000 = 35,000
(d) Accounts payable: 16,000 7,000 = 9,000
(e) Notes payable: 21,000 + (13,000 3,000) = 31,000
(f) Long-term debt payable: 124,000 23,000 = 101,000
(g) Paid-in capital: 200,000 + 23,000 = 223,000

Note: Event 4 requires no change in the balance sheet.

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1-33
1. See Exhibit 1-33.

2.
LMN CORPORATION
Balance Sheet
January 31, 20X1
(In Thousands of Dollars)
Liabilities and
Assets Stockholders Equity
Liabilities:
Cash $131 Note payable $ 30
Accounts payable 106
Merchandise inventory 269 Total liabilities $136
Stockholders equity:
Equipment 36 Capital stock,
$1 par, 30,000 shares
issued and outstanding $ 30
Additional paid-in capital
in excess of par value 270 300
Total Assets $436 Total Liab & S.E. $436

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EXHIBIT 133
LMN CORPORATION
January 20X1
Analysis of Transactions
(In Thousands of Dollars)

Assets Liabilities + Owners Equity


Merch- Capital Additional
andise Equip- Notes Accounts Stock Paid-in
Description of Transactions Cash + Inventory + ment = Payable + Payable + (at par) + Capital
1. Original incorporation +300 = + 30 + 270
2. Inventory purchased 95 +95 =
3. Inventory purchased +85 = + 85
4. Return of inventory to supplier 11 = 11
5. Purchase of equipment 10 +40 = +30
6. Sale of equipment +4 4 =
7. Payment to creditor 18 = 18
8. Inventory purchased 50 +100 = + 50
9. No entry except on detailed underlying
records =
Balance, January 31, 20X1 +131 +269 +36 = +30 +106 + 30 + 270

436 436

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1-41

UNITED TECHNOLOGIES CORPORATION


Balance Sheet
June 30, 2009
(In Millions of Dollars)

Liabilities and
Assets Stockholders Equity
Cash $ 4,016 (1) Accounts payable $ 4,599
Inventories 8,539 Other liabilities 24,819
Fixed assets 6,179 Long term debt 8,721
Other assets 37,811 Total liabilities 38,139
Common stock $11,369
Other stockholders equity 7,037 (3)
Total stockholders equity 18,406 (2)
Total liabilities and
Total assets $56,545 stockholders equity $56,545

Notations (1), (2), and (3) designate the answers to the requirements. (1) The $4,016 cash was
computed by taking total assets minus all assets except cash. To calculate (2) and (3), note that
total assets must equal total liabilities plus stockholders equity, $56,545. Furthermore, total
liabilities is $4,599 + $24,819 + $8,721 = $38,139. Therefore, total stockholders equity is
$56,545 $38,139 = $18,406, denoted by (2) above. Other stockholders equity is $18,406
$11,369 = $7,037, denoted by (3) above.

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This solution is based on the Annual Report for fiscal year 2011 provided on Cisco Systems
website.

1. The letter is very optimistic and future oriented. It indicates that If you look at our
momentum, were clearly responding well to market challenges.

2. Cisco was founded in 1984. It pioneered Internet Protocol (IP)-based networking


technologies.

3. Ciscos total assets at the end of fiscal 2011 were $87,095 million, its total liabilities were
$39,836 million, and total shareholders equity was $47,259 million and includes a
component called noncontrolling interests in the amount of $33 million.

4. Inventories are $1,486 million, which is $159 million more than a year ago and represents
nearly 12% increase. This contributes to an increase in total assets of $5,965 million
(about 7.35% change over the previous year). In general, this suggests sales may have
slowed down in the last year, with less cash payments and a buildup in inventory.

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5. The audit report states: The Companys management is responsible for these financial
statements. . . Our responsibility is to express opinions on these financial statement . . .
based on our integrated audits.

6. Cisco has 12 members of the board of directors. Of these, 2 are part of Ciscos
management team. There is one academic, the president of Stanford University. The
others are all executives with other companies.

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