Understanding Financial Accounting 3rd Canadian Edition by Christopher D. Burnley solution manual

 
LO 5  BT: C  Difficulty: M Time: 10 min.  AACSB: None  CPA: cpa-t001  CM: Reporting

READING AND INTERPRETING PUBLISHED FINANCIAL STATEMENTS SOLUTIONS
 
RI1-1
a.           Dividends declared in 2020 are $69,977. This amount is included in the consolidated statement of changes in shareholders’ equity.  The actual amount paid for dividends was ($44,636) as shown on the consolidated statement of cash flows.
 
b.        All amounts are in thousands of Canadian dollars.
       i.      Revenues in 2020: $2,220,180.
       ii.     Cost of sales in 2020: $1,236,258
       iii.    Gross profit in 2020: $983,922 or 44.3%.
       iv.    Selling, general and administrative expenses in 2020: $750,951
       v.     Income tax expense in 2020: $47,235
       vi.    Net income in 2019:  $106,929.
       vii.    Trade receivables at the end of 2019: $140,535
       viii.   Inventories at the end of 2020: $332,072.
       ix.    Trade payables and other payables at the beginning of 2020 fiscal year: $256,539.
       x.     Retained earnings at the end of 2020: $842,604 (from the consolidated statement of changes in shareholders' equity or the statement of financial position).
       xi.    Loans and borrowings at the beginning of 2020: $95,000 ($70,000 + $25,000)
       xii.   Cash flows provided from operating activities in 2020: $511,424
       xiii.   Cash payments to purchase property, plant, and equipment in 2020: ($43,493).
       xiv.   Cash payments for dividends in 2020: $(44,636).
       xv.   Cash flows used for financing activities in 2019: ($192,457).
       xvi. Cash payments to repurchase common shares in 2020: ($48,202).
 
c.     The largest sources of cash are $511,424 from operating activities, and $30,586 from the proceeds on sale of debt and equity instruments.
 
         The largest uses of cash are ($71,076) for the payment of lease liabilities and ($48,202) for the repurchase of common shares.

RI1-1 (Continued)
 
d.    To compute cash flow from operations, net earnings are increased by the non-cash items including depreciation and amortization expense, and further adjusted by changes in working capital items such as inventory and accounts payable. Also, cash was received from warranty plan sales, which would not have been included in revenue yet, since it has not been earned.
 
e.    While revenues decreased by $63,231, gross profit only decreased by $14,663. This means that cost of goods sold decreased by a larger percentage than did the decrease in the revenues. Selling, general and administrative expenses decreased by $79,544.  Together, this helps explain why net income for the year increased in spite of a decrease in revenues.
 
LO 5  BT: AN  Difficulty: M Time: 40 min.  AACSB: Analytic CPA: cpa-t001, cpa-t005
 CM: Reporting and Finance
 
RI1-2
 
a.     The use of the term “consolidated” means that the company has, at a minimum, a parent company and a subsidiary – a company that is controlled by the parent company generally through holding voting shares. Since Waterloo Brewing’s financial statements do not include the word consolidated, this could mean that the company does not own (or control) any subsidiaries.  
 
b.   
Year     Current assets   Current liabilities     Working capital
2021              $24,944,817            $54,396,558         $(29,451,741)
2020              16,246,586              30,999,384        (14,752,798)