E115 Classifty items as assets liabilities and stockholders

E1-15 Classifty items as assets, liabilities, and stockholders\' equity, and prepare accounting equation Suppose the following items were taken from the balance sheet of Nike, Inc. (All items are in millions.) 1. Cash 2 Accounts receivable 3. Common stock 4. Notes payable 5. Buildings 6. Mortgage payable $2,291 $2,884 $2,874 $343 $3,760 $1,312 7. Inventory 8. Income taxes payable 9. Equipmert 10. Retained earnings $5,819 11. Accounts payable $2,816 $2,357 $86 $1,958 Instructions (a) Classify each of these items as an asset, liability, or stockholders\' equity and determine the tota dollar amount for each classification. Determine Nike\'s accounting equation by calculating the value of total assets, total liabilities, and total stockholders\' equity To what extent does Nike rely on debt versus equity financing? (b) (c)

Solution

Answer

a.

Assets

Cash

           2,291

Accounts Receivable

           2,884

Inventory

           2,357

Equipment

           1,958

Buildings

           3,760

Total Assets

         13,250

Liabilities

Notes Payable

               343

Accounts Payable

           2,816

Mortgage payable

           1,312

Income Taxes payable

                 86

Total Liabilities

           4,557

Stockholder\'s Equity

Common Stock

           2,874

Retained Earnings

           5,819

Total Stockholder\'s Equity

           8,693

b.

Assets

=

Liabilities

+

Stockholder\'s Equity

      13,250

=

         4,557

+

                               8,693

c.

Assets financed by Debt = Total Liabilities / Total Assets

Assets financed by Equity = Total Equity / Total Assets

Total Liabilities

        4,557

Total Assets

     13,250

Assets financed by Debt

34.39%

Total Equity

        8,693

Total Assets

     13,250

Assets financed by Equity

65.61%

Assets
Cash	2,291
Accounts Receivable	2,884
Inventory	2,357
Equipment	1,958
Buildings	3,760
Total Assets	13,250
Liabilities
Notes Payable	343
Accounts Payable	2,816
Mortgage payable	1,312
Income Taxes payable	86
Total Liabilities	4,557
Stockholder\'s Equity
Common Stock	2,874
Retained Earnings	5,819
Total Stockholder\'s Equity	8,693