ACC1002X Financial Accounting

Semester 2 of Academic Year 2015-2016

SOLUTIONS to Optional Questions
CHAPTER 1: 1-30, 1-33, 1-41, 1-53

1-30
LIVERPOOL COMPANY
Balance Sheet
November 30, 20X1
(in pounds)
Liabilities and
Stockholders Equity

Assets
Cash
Merchandise inventory
Furniture and fixtures
Machinery and equip.
Land
Building
Total Assets

(a)
(b)
(c)
(d)
(e)
(f)
(g)

18,000 (a)
29,000
8,000
33,000 (b)
35,000 (c)
241,000
364,000

Liabilities:
Accounts payable
Notes payable
Long-term debt payable
Total liabilities
Stockholders equity:
Paid-in Capital
Total Liab & S.E.

9,000 (d)
31,000 (e)
101,000 (f)
141,000
223,000 (g)
364,000

Cash: 22,000 3,000 7,000 + 6,000 = 18,000

Machinery and equipment: 20,000 + 13,000 = 33,000
Land: 41,000 6,000 = 35,000
Accounts payable: 16,000 7,000 = 9,000
Notes payable: 21,000 + (13,000 3,000) = 31,000
Long-term debt payable: 124,000 23,000 = 101,000
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

Stockholders Equity

Assets
Cash
Merchandise inventory
Equipment

Total Assets

$131
269
36

$436

Liabilities:
Note payable
Accounts payable
Total liabilities
Stockholders equity:
Capital stock,
$1 par, 30,000 shares
issued and outstanding
Additional paid-in capital
in excess of par value
Total Liab & S.E.

$ 30
106
$136

$ 30
270

300
$436

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

Description of Transactions
1. Original incorporation
2. Inventory purchased
3. Inventory purchased
4. Return of inventory to supplier
5. Purchase of equipment
6. Sale of equipment
7. Payment to creditor
8. Inventory purchased
9. No entry except on detailed underlying
records
Balance, January 31, 20X1

Cash +
+300
95

Assets
Merchandise
EquipInventory + ment
+95
+85
11

10
+4
18
50

+100

+131

+269

+40
4

436

+36

Liabilities

=
=
=
=
=
=
=
=
=
=
=

Notes
Accounts
Payable + Payable

Owners Equity
Capital
Additional
Stock
Paid-in
+ (at par) + Capital
+ 30
+ 270

+ 85
11
+30
18
+ 50

+30

+106

+ 30

+ 270

436

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1-41
UNITED TECHNOLOGIES CORPORATION
Balance Sheet
June 30, 2009
(In Millions of Dollars)
Liabilities and
Stockholders Equity

Assets
Cash
Inventories
Fixed assets
Other assets

$ 4,016 (1)
8,539
6,179
37,811

Total assets

$56,545

Accounts payable
Other liabilities
Long term debt
Total liabilities
Common stock
Other stockholders equity
Total stockholders equity
Total liabilities and
stockholders equity

$ 4,599
24,819
8,721
38,139
$11,369
7,037 (3)
18,406 (2)
$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.

1-53
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.

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.

It pioneered Internet Protocol (IP)-based networking

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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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