2016 final solution

.pdf

School

Seton Hall University *

*We aren’t endorsed by this school

Course

2103

Subject

Finance

Date

May 6, 2024

Type

pdf

Pages

Uploaded by BaronElementTurtle3 on coursehero.com

April 2016 Final Examination INTRODUCTION TO FINANCIAL ACCOUNTING April 29, 2016 2:00PM - 5:00PM Day & Time of your class: Student Name: ID: INSTRUCTIONS:  This is a CLOSED BOOK, CLOSED NOTES examination.  SPACE IS PROVIDED on the examination to answer the problems.  NON-PROGRAMMABLE CALCULATOR permitted ONLY.  Translation dictionaries are allowed.  This examination consists of a total of 17 pages, including the cover page.  All questions are to be answered on this examination paper. Answer the question in the space provided. Do not exceed the space allowed.  Show all your calculations and explain your reasoning, failure to do so may lead to partial marks deducted . All companies are expected to be IFRS compliant unless stated otherwise and all amounts are material unless otherwise noted in the question.  This examination is PRINTED ON BOTH SIDES of the paper.  This examination paper MUST BE RETURNED. Marks allocated Your Grade Problem 1 Statement of Cash Flows 24 Problem 2 FURNITURE-MART LIMITED 14 Problem 3 Liabilities 11 Problem 4 P.P.E. 7 Problem 5 Inventory 20 Problem 6 Accounts Receivable 8 Problem 7 Bank reconciliation 5 Problem 8 Equity 11 TOTAL 100 1

PROBLEM 1: Statement of Cash Flows 21 MARKS Selected information from Juno Ltd.’s statement of financial position and income statement is shown on the following page: JUNO LTD. Statement of Financial Position (partial) December 31, 2015 2015 2014 Current assets Accounts receivable $7,000 $12,000 Merchandise inventory 5,900 4,500 Prepaid expenses 3,000 2,500 Current liabilities Accounts payable 3,750 2,500 Income tax payable 1,200 800 Accrued liabilities 2,500 1,500 Bank loan payable – current portion 5,000 10,000 JUNO LTD. Income Statement Year Ended December 31, 2015 Net sales $190,000 Cost of goods sold 114,000 Gross profit 76,000 Operating expenses 50,000 Profit from operations 26,000 Interest expense 1,200 Profit before income tax 24,800 Income tax expense 3,800 Profit 21,000 Additional information: 1. The bank loan was issued to finance the purchase of equipment. 2. Operating expenses included depreciation expense of $11,000 and a loss of $5,000 on the disposal of equipment. Instructions Prepare the operating activities section of the statement of cash flows, using the indirect method. 2

JUNO LTD. Statement of Cash Flows (Partial)—Indirect Method Year Ended December 31, 2015 Operating activities Profit .......................................................... ……….. $21,000 Adjustments to reconcile profit to net cash provided (used) by operating activities Depreciation expense ..................................................... $11,000 (3 mark) Loss on disposal of equipment ....................................... 5,000 (3 mark) Decrease in accounts receivable ................................... 5,000 (3 mark) Increase in merchandise inventory ................................ (1,400) (3 mark) Increase in prepaid expenses ........................................ (500) (3 mark) Increase in accounts payable ......................................... 1,250 (3 mark) Increase in income tax payable ...................................... 400 (3 mark) Increase in accrued liabilities ......................................... 1,000 (3 mark) Net cash provided by operating activities ......................................... $42,750 Note: The current portion of the bank loan payable was not included because this bank loan was issued for borrowing purposes rather than trade. 3

PROBLEM 2: FURNITURE-MART LIMITED 16 MARKS FURNITURE-MART LIMITED CONSOLIDATED BALANCE SHEETS As at December 31 (in thousands) 2009 2008 Assets Current Cash and cash equivalents $ 58,301 $ 39,483 Marketable securities 94,337 83,194 Restricted marketable securities 18,088 16,598 Accounts receivable 31,501 30,291 Income taxes recoverable − 2,037 Inventory 83,957 92,904 Future tax assets 1,133 270 Total current assets $ 287,317 $ 264,777 Prepaid expenses 1,560 1,490 Goodwill 11,282 11,282 Intangible assets, net 5,334 5,401 Other receivables ‐ 419 Future tax assets 11,465 10,752 Property, plant and equipment, net 212,198 219,287 $ 529,156 $ 513,408 Liabilities and Shareholders' Equity Current Accounts payable and accrued liabilities $ 83,880 $ 95,247 Income taxes payable 1,958 − Customers' deposits 15,632 14,119 Dividends payable 4,938 4,952 4

Deferred warranty plan revenue 16,150 15,267 Total current liabilities $ 122,558 $ 129,585 Deferred warranty plan revenue 22,248 21,712 Redeemable share liability 383 285 Future tax liabilities 8,829 8,468 Total liabilities $ 154,018 $ 160,050 Shareholders' equity Common shares 17,704 16,493 Retained earnings 357,576 338,960 Accumulated other comprehensive loss (142) (2,095) Total shareholders' equity $ 375,138 $ 353,358 $ 529,156 $ 513,408 5

FURNITURE-MART LIMITED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Years ended December 31 (in thousands except shares outstanding and earnings per share) 2009 2008 Sales $ 703,180 $740,376 Cost of sales 419,819 440,360 Gross profit $ 283,361 $300,016 Operating expenses (income) Salaries and commissions $ 103,977 $112,270 Advertising 34,732 33,752 Rent and property taxes 12,165 11,268 Depreciation 16,562 16,253 Employee profit ‐ sharing plan 4,177 4,321 Other operating expenses 42,359 46,447 Interest income, net (3,165) (4,836) Other (gains) and losses (9,980) (13,595) $ 200,827 $205,880 Income before income taxes 82,534 94,136 Provision for income taxes 25,670 30,746 Net income for the year $ 56,864 $ 63,390 Retained earnings, beginning of year 338,960 307,068 Dividends declared (33,951) (26,873) Excess of cost of share repurchase over carrying value of related shares (4,297) (4,625) Retained earnings, end of year $ 357,576 $338,960 Business description: Furniture-Mart Limited has been in the furniture retail business for over 100 years. As of December 31, 2009, the Company had 46 corporate and 32 franchise stores which, can be found in every province across Canada. Main product lines sold at retail include furniture, appliances and electronics. The Company’s business is seasonal in nature. Retail sales are traditionally higher in the third and fourth quarters. 6 (1). Assume that all sales were on account, determine the amount of cash that was collected from customers in fiscal 2009.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version