Question 1 -
The comparative balance sheets of Gelinas Limited, a privately held company, show the following information as at December 31, 2016.
|
2016
|
2015
|
|
Cash
|
$ 38,500
|
$ 13,000
|
|
Accounts Receivable
|
12,250
|
10,000
|
|
Inventory
|
12,000
|
9,000
|
|
Investments (long-term)
|
0
|
3,000
|
|
Building
|
0
|
29,750
|
|
Equipment
|
40,000
|
20,000
|
|
Patent
|
5,000
|
6,250
|
|
Totals
|
$107,750
|
$ 91,000
|
|
Allowance for Doubtful Accounts
|
$3,000
|
$4,500
|
|
Accumulated Depreciation - Equipment
|
2,000
|
4,500
|
|
Accumulated Depreciation - Building
|
0
|
6,000
|
|
Accounts Payable
|
5,000
|
3,000
|
|
Dividends Payable
|
0
|
6,000
|
|
Notes Payable (short-term)(trade)
|
3,000
|
4,000
|
|
Long Term Notes Payable
|
31,000
|
25,000
|
|
Common Shares
|
43,000
|
33,000
|
|
Retained Earnings
|
20,750
|
5,000
|
|
Totals
|
$107,750
|
$ 91,000
|
Additional data relating to 2016 are as follows:
1. Equipment that had cost $11,000 and was 40% depreciated at the time of disposal was sold for $2,500.
2. $10,000 of the long-term note payable was paid by issuing common shares.
3. Cash dividends paid were $6,000.
4. In early 2015, an unused building was expropriated by the federal government. Proceeds received were $33,000.
5. Investments (long-term) were sold for $2,500 above their cost.
6. Cash of $15,000 was paid for the acquisition of equipment.
7. A long-term note for $16,000 was issued for the acquisition of equipment.
8. Interest of $2,000 and income taxes of $5,000 were paid in cash.
Required: Prepare a properly formatted Cash Flow Statement for the year ended December 31, 2016 using the indirect method. Gelinas elected to report the government expropriation as an unusual item. Gelinas follows ASPE.
Question 2 -
The comparative financial information of Stewart Ltd. for the years ending December 31, 2016 is shown below:
|
|
2016
|
|
|
Sales
|
$4,369,000
|
|
|
Cost of goods sold
|
(3,728,000)
|
|
|
Gross profit
|
641,000
|
|
|
Gain on disposal of capital asset
|
13,000
|
|
|
Amortization expense
|
(88,000)
|
|
|
Operating expense
|
(298,000)
|
|
|
Interest expense
|
(54,000)
|
|
|
Income tax expense
|
(47,000)
|
|
|
Net income
|
$167,000
|
|
|
Cash
|
$440,000
|
$453,000
|
|
Accounts receivable
|
666,000
|
621,000
|
|
Inventory
|
631,000
|
655,000
|
|
Property, plant, and equipment
|
1,240,000
|
1,333,000
|
|
Accumulated depreciation
|
(327,000)
|
(457,000)
|
|
|
$2,650,000
|
$2,605,000
|
|
Accounts payable
|
$251,000
|
$325,000
|
|
Interest payable
|
47,000
|
44,000
|
|
Income taxes payable
|
40,000
|
51,000
|
|
Long-term debt - due 2020
|
800,000
|
700,000
|
|
Common shares, no-par value
|
900,000
|
1,000,000
|
|
Retained earnings
|
612,000
|
485,000
|
|
|
$2,650,000
|
$2,605,000
|
During 2016, Stewart sold property, plant, and equipment with a net book value of $142,000 for $155,000.
Required - Prepare a properly formatted Cash Flow Statement for Stewart Ltd. for the year ended December 31, 2016 using the direct method. Stewart follows IFRS.
Question 3 -
Northern Products Limited (NPL) is a small private corporation. The owner plans to approach the bank for an additional line of credit to facilitate expansion. The company's inexperienced bookkeeper, after discussion with the owner of the company, has prepared the following draft Statement of Financial Position covering the accounting year ending September 30, 2016, the company's first full year of operations:
Assets:
Cash in the bank - $12,000
Patent - 30,000
Goodwill - 50,000
Equipment - 120,000
Amounts owed by customers - 32,000
Stocks and bonds owned by the company - 10,000
Total - $254,000
Financing sources for assets:
Amounts owed to suppliers - $ 28,000
Amounts owed to owner for automobile expenses - 6,000
Amounts owed to owner's brother-in-law - 20,000
Amount owed to bank - 26,000
Earnings accumulated in the business - 27,000
Common shares paid for by owner - 60,000
Cash flow from used-up portion of equipment - 24,000
Increases in value - 63,000
Total - $254,000
The bookkeeper has provided notes relating to the amounts shown in the above Statement of Financial Position as follows:
(a) The owner invested $60,000 of his own money to start the business.
(b) The patent was purchased from the owner's brother-in-law for $17,000. The owner believes that the patent could easily be sold for $30,000, and probably more.
(c) The equipment is being depreciated at the same rate as allowed for income tax. Depreciation represents a source of financing for the company because it is added back to net income and increases the operating cash flow.
(d) The owner uses his personal automobile for occasional business errands. He estimates that the company owes him $6,000 for his use of his personal car.
(e) Because the business has been profitable from the very first, the owner estimates that he could sell the company at a $50,000 premium, thereby almost doubling his initial investment after only one year.
(f) The bank gave a five-year loan to the company, with the provision that the company has to maintain a 25% "compensating balance" in its cash account until the loan is repaid.
(g) The company holds some publicly traded shares in other companies. The value of these securities was $10,000 when the owner's brother-in-law gave them to the company as a loan on April 1, 2016. On September 30, 2016, their market value was $14,000. The company is free to sell the securities, but $10,000 plus one-half of any proceeds above $10,000 must be passed on to the brother-in-law. The brother-in-law also lent $10,000 cash to the company repayable on demand.
(h) One of the company's customers is a bit unsteady, financially. The customer owes $3,000.
Required: Prepare in proper format a revised Statement of Financial position as at September 30, 2016 for NPL. Provide an explanation for each change that you make. Also, provide any note disclosures that you think are needed.
Question 4 -
The following pre-tax items were taken from the December 31, 2016 adjusted trial balance of Yulee Corporation, a public company which follows IFRS. Yulee's accounting period ends December 31. All accounts have normal balances. Assume a 20% tax rate on all items, where appropriate.
Sales revenue - $745,200
Unearned revenue - 40,000
Rent revenue - 2,400
Interest revenue - 900
Gain on sale of capital assets - 2,000
Distribution expenses - 136,000
General and administrative expenses - 110,000
Interest expense - 1,500
Depreciation expense - 6,000
Prepaid expense - 3,200
Loss from hurricane - 19,000
Loss on re-measurement of defined benefit pension plan - 28,000
Loss on re-measurement of FV-OCI investments - 36,250
Correction for understatement of net income in prior period due to error in recording depreciation expense - 44,000
Cost of goods sold - 330,000
Operating loss of discontinued operations to disposal date - 38,000
Gain on sale of net assets of discontinued operations - 8,000
Average common shares issued and outstanding during the year - 120,000 shares
Average preferred shares issued and outstanding during the year - 30,000 shares
Yulee Corporation presents its expenses by function. Dividends declared during the year were as follows: (i) common shares: $24,000 in total; (ii) preferred shares: $0.75 per share
Required: Prepare a properly formatted Statement of Comprehensive Income in multiple-step format for Yulee Corporation for the year ended December 31, 2016. Include any necessary disclosure.