E13 11 (both methods)
The comparative statement of financial position for Puffy Ltd. follows:
PUFFY LTD.
Statement of Financial Position
December 31
2012 2011
Assets
Cash $ 53,000 $ 22,000
Accounts receivable 80,000 76,000
Inventories 185,000 189,000
Land 70,000 100,000
Equipment 265,000 200,000
Accumulated depreciation ( 66,000) ( 32,000)
Total assets $ 587,000 $ 555,000
Liabilities and Shareholders’ Equity
Accounts payable $ 39,000 $ 47,000
Bank loan payable 150,000 200,000
Common shares 199,000 174,000
Retained earnings 199,000 134,000
Total liabilities and shareholders’ equity $ 587,000 $ 555,000
Additional information:
1. Pro t was $ 115,000.
2. Sales were $ 978,000.
3. Cost of goods sold was $ 751,000.
4. Operating expenses were $ 43,000, exclusive of depreciation expense.
5. Depreciation expense was $ 34,000.
6. Interest expense was $ 14,000.
7. Income tax expense was $ 26,000.
8. Land was sold at a gain of $ 5,000.
9. No equipment was sold during the year.
10. $ 50,000 of the bank loan was repaid during the year.
11. Common shares were issued for $ 25,000.
Instructions Prepare a statement of cash ows using ( a) the indirect method, or ( b) the direct method, as assigned by your instructor.
P13 9A
Selected information ( in thousands) for Reitmans ( Canada) Limited and Le Château Inc. for fiscal 2010 follows:
Reitmans Le Château
Net cash provided by operating activities $ 146,139 $ 41,643
Average current liabilities 77,798 42,691
Average total liabilities 115,926 76,414
Net capital expenditures 33,185 20,075
Dividends paid 49,351 17,010
Instructions
a) Calculate the cash current debt coverage ratio, cash total debt coverage ratio, and free cash flow for each company.
b) Using the ratios calculated in (a), compare the liquidity and solvency of the two companies.
P14 3A
The following condensed information is available for the former Big Rock Brewery Income Trust, known as Big Rock Brewery Inc. effective January 1, 2011:
BIG ROCK BREWERY
Statement of Financial Position
December 31
(in thousands)
2010 2009 2008
Assets Current assets $ 7,426 $ 8,380 $ 6,684
Non current assets 27,035 27,985 29,216
Total assets $ 34,461 $ 36,365 $ 35,900
Liabilities and Unitholders’ Equity
Liabilities
Current liabilities $ 4,322 $ 4,725 $ 4,676
Non current liabilities 4,786 5,939 6,228
Total liabilities 9,108 10,664 10,904
Unitholders’ equity 25,353 25,701 24,996
Total liabilities and unitholders’
equity $ 34,461 $ 36,365 $ 35,900
BIG ROCK BREWERY
Income Statement December 31
(in thousands)
2010 2009 2008
Net sales $ 45,130 $ 46,232 $ 37,633
Cost of sales 19,418 20,216 14,905
Gross profit 25,712 26,016 22,728
Operating expenses 20,054 19,038 18,345
Profit from operations 5,658 6,978 4,383
Interest expense 147 142 178
Other income ( 327) ( 304) ( 219)
Profit before income tax 5,838 7,140 4,424
Income tax recovery ( 279) ( 289) ( 531)
Profit $ 6,117 $ 7,429 $ 4,955
Instructions
a) Prepare a vertical analysis of the statement of financial position and income statement for each year.
b) Identify the key components in Big Rock’s statement of financial position and income statement that are primarily responsible for the change in the company’s financial position and performance over the three year period.
c) How has Big Rock primarily financed its assets— through debt or equity— over the last three years?
P13 6B (indirect only)
Financial statements for Nackawic Inc. follow:
NACKAWIC INC.
Statement of Financial Position
December 31
2012 2011
Assets Cash $ 82,700 $ 47,250
Accounts receivable 80,800 37,000
Inventories 131,900 102,650
Long term investments 94,500 107,000
Property, plant, and equipment 290,000 205,000
Accumulated depreciation ( 49,500) ( 40,000)
Total assets $ 630,400 $ 458,900
Liabilities and Shareholders’ Equity
Accounts payable $ 62,700 $ 48,280
Accrued liabilities 12,100 18,830
Bank loan payable 140,000 70,000
Common shares 240,000 200,000
Retained earnings 175,600 121,790
Total liabilities and shareholders’ equity $ 630,400 $ 458,900
NACKAWIC INC.
Income Statement Year Ended
December 31, 2012
Sales $ 317,500
Cost of goods sold 99,460
Gross profit 218,040
Operating expenses 82,120
Profit from operations 135,920
Other expenses and losses
Interest expense $ 12,940
Realized loss on sale of long term investments 7,500 20,440
Profit before income tax 115,480
Income tax expense 27,670
Profit $ 87,810
Additional information:
1. Long term investments were sold for $ 5,000, resulting in a realized loss of $ 7,500.
2. New equipment costing $ 141,000 was purchased for $ 71,000 cash and a $ 70,000 bank loan payable.
3. Equipment costing $ 56,000 was sold for $ 15,550, resulting in a gain of $ 8,750.
4. Accounts payable relate to merchandise creditors; accrued liabilities relate to operating expenses.
5. A dividend was paid during the year.
6. Operating expenses include $ 58,700 of depreciation expense and an $ 8,750 gain on sale of equipment.
Instructions
a) Prepare the statement of cash flows, using either (1) the indirect method or (2) the direct method, as assigned by your instructor.
b) Nackawic’s cash position increased by 75 percent between 2011 and 2012. Identify the primary reason(s) for this significant increase.
