Discussion post 4 - Lecture notes 3 PDF

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BE13.1 (LO 1) For each of the following transactions, indicate whether it will result in an increase (+), decrease (−), or have no effect (NE) on cash flows: A. __-__ Repayment of mortgage payable B. __-__ Payment of interest on mortgage C. __NE__ Purchase of land in exchange for common shares D. __+__ Issue of preferred shares for cash E. __-__ Payment for the purchase of a trading investment F. ___+_ Collection of accounts receivable G. __NE__ Declaration of cash dividend H. __-__ Payment of cash dividend I. __-__ Cash purchase of inventory J. __+__ Recording of depreciation expense K. __-___ Purchase and cancellation of common shares

BE13.2 (LO 1) Classify each of the transactions listed in BE13.1 as an operating (O), investing (I), financing (F), or significant noncash investing and financing (NC) activity. If a transaction does not belong in any of these classifications, explain why. A. O B. O C. NC D. F E. I F. O G. NC H. F I. O J. NC K. F BE13.4 (LO 2) Indicate whether each of the following items would be added to (+) or subtracted from (−) net income to calculate net cash provided (used) by operating activities using the indirect method. If a

transaction is not shown in the operating cash flows section of the statement of cash flows, indicate that it is NA (not applicable). A. ____ Depreciation expense b. ____ Increase in accounts receivable c. ____ Decrease in inventory d. ____ Increase in accounts payable e. ____ Interest expense f. ____ Increase in deferred revenue g. ____ Decrease in estimated inventory returns h. ____ Decrease in income tax payable i. ____ Gain on disposal of equipment j. ____ Loss on sale of long-term investment k. ____ Decrease in dividends payable l. ____ Impairment loss for goodwill m. ____ Increase in refund liability n. ____ Decrease in 60-day term deposit

BE14.1 (LO 1) Selected data from the comparative statements of financial position of Rioux Ltd. are shown below:

Cash Accounts receivable Inventory Property, Plant and Equipment Intangible Assets Total assets

2021 $150,000 600,000 780,000 3,130,000 90,000 $4,750,000

2020 $175,000 400,000 600,000 2,800,000 100,000 $4,075,000

2019 $75,000 450,000 700,000 2,850,000 0 $4,075,000

Using horizontal analysis, calculate the percentage of a base-year amount, assuming 2019 is the base year. Analysis period / base-year period = percentage of base year period 2019 - 100% 2020 - 100% 2021 – 116% Using horizontal analysis, calculate the percentage change for each year. From 2019 to 2020 there was a 0% change from year to year, but from 2019 to 2021 there was an increase of 16.6 %. Use horizontal analysis to determine change in net income. BE14.2 (LO 1) Selected horizontal percentages of a base-year amount from Coastal Ltd.’s statement of income is listed here: 2021 Sales Cost of goods sold Operating expense Income tax expense

2020 110% 105% 99% 136%

2019 101% 111% 112% 60%

100% 100% 100% 100%

Assuming that Coastal did not have any non-operating or irregular items, did its net income increase, decrease, or remain unchanged over the period from 2019 to 2021? Explain the reasons for your answer. Prepare horizontal and vertical analyses. BE14.4 (LO 1) Selected data (in thousands) from the statement of income of JTI Inc. are shown below. Using vertical analysis, calculate the percentage of the base amount for each year. Sales Cost of goods sold Gross Profit Operating expense Income before income tax Income tax expense Net income

2021 $1,914 1,612 302 218 84 17 $67

2021 % 100% 84% 15.8% 11% 4% .9% 3.5%

Net income was reduced by half from 2020 to 2021.

2020 $2,073 $1674 399 210 189 38 $151

2020 % 100% 80.7% 19% 10% 9% 18% 7%...