Question

Nike, Inc., with headquarters in Beaverton, Oregon, is one of the world’s leading manufacturers of athletic shoes and sports apparel. The following activities occurred during a recent year. The amounts are rounded to millions, except for par value.

1. Purchased additional buildings for $303 and equipment for $1,202; paid $432 in cash and signed a long-term note for the rest.

2. Issued 10 shares of $1 par value common stock for $695 cash.

3. Declared $1,159 in dividends to be paid in the following year.

4. Purchased additional short-term investments for $5,928 cash.

5. Several Nike investors sold their own stock to other investors on the stock exchange for $7,150.

6. Sold $2,423 in short-term investments for $2,423 in cash.

For each of the events (a) through (f), perform transaction analysis and indicate the account, amount, and direction of the effect (+ for increase and − for decrease) on the accounting equation. Check that the accounting equation remains in balance after each transaction. (If no impact on the accounting equation leave cells blank. Enter your answers in millions.)

Answer 1

	Assets	=	Liabilities	+	Equity
a	1,073.00	=	1,073.00	+	0.00
b	695.00	=	0.00	+	695.00
Balance	1,768.00	=	1,073.00	+	695.00
c	0.00	=	1,159.00	+	- 1,159.00
Balance	1,768.00	=	2,232.00	+	-     464.00
d	0.00	=	0.00	+	0.00
Balance	1,768.00	=	2,232.00	+	-     464.00
e	No impact
Balance	1,768.00	=	2,232.00	+	-     464.00
f	0.00	=	0.00	+	0.00
Balance	1,768.00	=	2,232.00	+	-     464.00

Explanation:

For “a” increase in assets = 303+1202-432 = 1073.

“b” and “c” are self-explanatory.

For “d” net change in asset will be nil as investments will increase by $5,928 and cash will fall by the same amount.

For “e” there will be no impact and hence this can be left blank.

For “f” net change in asset will be nil as investments will fall by $2,423 and cash will increase by the same amount.