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Real-Life Math -- Solution

You add together the total liabilities and the total net worth:

2,033 + 6,607 = 8,640

There is a problem. This figure does not match the total assets.

Assets = Liabilities + Net Worth
9,090 = 8,640

This is not correct. The sheet is not balanced.

When you point this out to the company president, he makes a quick phone call. It turns out there was a mistake in the liabilities section. The figure for accounts payable should have been 721 instead of 271.

You add up the liabilities section again with the new figure.

Liabilities

Accounts Payable721
Income Taxes Payable355
Unearned Revenue1,407

721 + 355 + 1,407 = 2,483

The new figure for total liabilities is 2,483.

You recalculate the total net worth and total liabilities.

2,483 + 6,607 = $9,090

This matches the total assets. While it was probably an honest mistake, you tell your client later that you're reluctant to recommend merging with a company that has such shoddy bookkeeping.


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