Prepare the operating activities section of the statement

Assignment Help Financial Accounting

Reference no: EM133924565

Question 1

The date is February 15, Year 5, and year end is December 31. The Year 4 books have been closed, but Year 4 financial statements have not yet been released. The income tax rate is 30%.

Required
For the following situations, describe the appropriate accounting treatment. State whether the item should be accounted for prospectively or retrospectively. Then, specifically state whether the item should be accrued in the Year 4 accounting records and adjusted on the financial statements; only be adjusted on the financial statements; only be disclosed in the Year 4 notes to the financial statements; or not be disclosed. Provide your reasons. If the scenario provides accounts and balances, state which accounts need to be adjusted, increased or decreased, and by how much.

You have a defined benefit pension plan. Your actuarial firm has just told you that the average life expectancy of your retirees has increased. Therefore, your defined benefit obligation will increase.

At the beginning of Year 4, we borrowed $500,000. Payments of $100,000 towards principal plus accrued interest are due each year. When preparing the financial statements, we did not correctly separate the current portion of long-term debt from the long-term portion.

We have a significant amount of receivables denominated in U.S. dollars. During February, due to factors beyond our control, the Canadian dollar weakened substantially against the U.S. dollar.

During January, we determined that we recognized revenues of $400,000 for merchandise sold on account in Year 4 that should have been recognized in Year 5. Gross profit is 40% of sales.

In February, our CEO died.

One of your customers owes you a large amount of money on account from a sale made in November, Year 4. During January, you received notice that this customer has declared bankruptcy.

At the end of January, one of our factories burned down. We have insurance, but it will be a long time before the plant can be rebuilt.

We mistakenly accrued interest expense of $30,000 as a selling and administrative expense. Get online assignment help-AI & plagiarism-free-now!

An estimated legal liability of $100,000 was accrued during Year 4. In early February it was settled for $130,000.

We had filed a notice of objection with the CRA in early Year 4. It was resolved in early February. We are required to pay substantially more tax than expected.

Question 2
Knutsford Corporation follows IFRS. Financial statements and notes for Knutsford Corporation are below:

Knutsford Corporation
Statement of Financial Position
December 31, Year 8
	Year 8	Year 7
Cash	$ 25,400	$ 0
Accounts receivable	13,500	16,950
FVNI investments	20,000	30,000
Inventory	42,000	35,000
Prepaid rent	7,000	12,000
Prepaid insurance	2,100	900
Supplies	1,000	750

Land	125,000	175,000
Buildings	350,000	350,000
Accumulated depreciation, buildings	(105,000)	(87,500)
Equipment	525,000	400,000

Accumulated depreciation, equipment	(130,000)	(112,000)
Patents	90,000	90,000
Accumulated amortization, patents	(45,000)	(40,000)
	$ 921,000	$ 871,100


Short-term bank overdraft	$ 0	$ 12,000
Accounts payable	22,000	20,000
Income tax payable	5,000	6,000
Salaries and wages payable	5,000	1,000
Short term note payable	10,000	10,000
Notes payable (long term)	60,000	70,000
Deferred tax liability	30,000	25,000
Bonds payable	375,000	375,000

Common shares	260,000	237,500
Retained earnings	154,000	114,600
Total liabilities and shareholder's equity	$ 921,000	$ 871,100

Knutsford Corporation
Income Statement
Year Ended December 31, Year 8

Revenues
Sales revenue		$ 1,160,000



Cost of goods sold		748,000
Gross profit		412,000

Operating expenses
Selling expenses	$ 39,200
Administrative expenses	124,700
Salaries expense	92,000
Depreciation and amortization expense	40,500	296,400
Income from operations		115,600
Other revenues and expenses
Gain on sale of land	8,000
Investment income **	6,400
Interest expense	41,750	27,350
Income before income tax		88,250
Income tax expense		29,400

Net income		$ 58,850

** Investment income from FVNI investments represents dividends of $2,400 and a gain on sale of $4,000.

Required
Complete the following with the details provided.
Prepare a statement of cash flows for Year 8 using the direct method.
Prepare the operating activities section of the statement of cash flows for Year 8 using the indirect method.

Reference no: EM133924565

Questions Cloud

What were some of positive outcomes of the war for the us : Discuss Tennessee's involvement in the War of 1812. What were some of the positive outcomes of the war for the United States, and for Jackson in particular?

Analyze the implementation of literacy instruction : Analyze the implementation of literacy instruction in your mentor teacher's classroom, recording your observations of instruction in phonemic awareness.

Values and challenges in it industry with neurodiversity : MBA502 Emotional Intelligence, Cultural Intelligence and Diversity, Assessment - Presentation on values and Challenges in IT industry with Neurodiversity

Provides evidence that your problem is indeed an issue : Compose a well-written quantitative statement of at least 500 words that provides evidence that your problem is indeed an issue worth studying.

Prepare the operating activities section of the statement : Prepare a statement of cash flows for Year 8 using the direct method. Prepare the operating activities section of the statement of cash flows

Identify three new startups in industry of selected company : Are there few substitutes with larger market share? Identify three new startups in the industry of your selected company.

Analyse the vuca environment : MG630 Change and Organisational Development, Buckinghamshire New University - Understand the strategic and operational importance of change in organisations

Who is the speakers intended audience : Who is the speaker's intended audience? What evidence from the speech suggests that this is the intended audience?

Briefly highlight data you would need to facilitate design : Assume you have been assigned duties as a team leader to design a new bridge. Briefly highlight the basic data you would need to facilitate design of the bridge

User Account

All Pages