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ACCTG311 Lecture Notes - Shoppers Drug Mart, Commercial Paper

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School
University of Alberta
Department
Accounting
Course
ACCTG311
Professor
Kristie Dewald

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Document Summary

For the 52 weeks ended december 31, 2011 and january 1, 2011 (in thousands of canadian dollars) Loss on sale or disposal of property and equipment, including impairments. Proceeds from disposition of property and equipment and investment property. 64,354 (1) in preparing its 2010 comparative information, the company has adjusted amounts reported previously in nancial statements prepared in accordance with previous canadian gaap. See note 30 to these consolidated nancial statements for an explanation of the transition to ifrs. The accompanying notes are an integral part of these consolidated nancial statements.

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Related Questions

A comparative balance sheet and income statement for EatonCompany follow:

Eaton Company
Comparative Balance Sheet
December 31, 2011 and 2010
2011 2010
Assets
Cash $ 4 $ 11
Accountsreceivable 310 230
Inventory 160 195
Prepaidexpenses 8 6
Total currentassets 482 442
Property, plant,and equipment 500 420
Less accumulateddepreciation 85 70
Net property,plant, and equipment 415 350
Long-terminvestments 31 38
Totalassets $ 928 $ 830
Liabilities and Stockholders' Equity
Accountspayable $ 300 $ 225
Accruedliabilities 70 80
Income taxespayable 71 63
Total currentliabilities 441 368
Bondspayable 195 170
Totalliabilities 636 538
Commonstock 160 200
Retainedearnings 132 92
Totalstockholders’ equity 292 292
Totalliabilities and stockholders' equity $ 928 $ 830


Eaton Company
Income Statement
For the Year Ended December 31, 2011
Sales $ 750
Cost of goodssold 450
Grossmargin 300
Selling andadministrative expenses 223
Net operatingincome 77
Nonoperatingitems:
Gain on sale ofinvestments $ 5
Loss on sale ofequipment (2) 3
Income beforetaxes 80
Incometaxes 24
Net income $ 56


During 2011, Eaton sold someequipment for $18 that had cost $30 and on which there wasaccumulated depreciation of $10. In addition, the company soldlong-term investments for $12 that had cost $7 when purchasedseveral years ago. A cash dividend was paid during 2011 and thecompany, repurchased $40 of its own stock. Eaton did not retire anybonds during 2011.


Required:
1.

Using the direct method, adjust thecompany’s income statement for 2011 to a cash basis.(Adjustment amounts that are to bededucted should be indicated with a minus sign. Omit the "$" signin your response.)


Eaton Company
Direct Method of Determining the Net Cash flows from Operatingactivities
Sales $
Adjustments to acash basis:
$
Cost of goodssold
Adjustments to acash basis:
Selling andadministrative expenses
Adjustments to acash basis:
Incometaxes
Adjustments to acash basis:
Net cashoperating activities $


2.

Using the information obtained in(1) above, along with an analysis of the remaining balance sheetaccounts, prepare a statement of cash flows for 2011.(Cash outflows and amounts to bededucted should be indicated with a minus sign. Omit the "$" signin your response.)


Eaton Company
Statement of Cash Flows
For the Year Ended December 31, 2011
Operating activities:
Cash receivedfrom customers $
Less cashdisbursements for:
$
Total cashdisbursements
Net cashoperating activities
Investingactivities:
Net cashinvesting activities
Financingactivities:
Net cashfinancing activities
Cash balance,beginning
Cash balance,ending $

A comparative balance sheet and income statement for Groton Company follow:


Groton Company
Comparative Balance Sheet
December 31, 2011 and 2010
2011 2010
Assets
Cash $ 1 $ 12
Accounts receivable 306 229
Inventory 158 196
Prepaid expenses 8 6
Total current assets 473 443
Property, plant, and equipment 509 430
Less accumulated depreciation (85) (71)
Net property, plant, and equipment 424 359
Long-term investments 25 32
Total assets $ 922 $ 834
Liabilities and Stockholders' equity
Accounts payable $ 301 $ 225
Accrued liabilities 70 80
Income taxes payable 72 63
Total current liabilities 443 368
Bonds payable 198 172
Total liabilities 641 540
Common stock 163 202
Retained earnings 118 92
Total stockholders’ equity 281 294
Total liabilities and stockholders' equity $ 922 $ 834


Groton Company
Income Statement
For the Year Ended December 31, 2011
Sales $ 754
Cost of goods sold 448
Gross margin 306
Selling and administrative expenses
 222
Net operating income 84
Non operating items:
Gain on sale of investments $ 6
Loss on sale of equipment (2) 4
Income before taxes 88
Income taxes
 23
Net income $ 65


During 2011, Groton sold some equipment for $19 that had cost $31 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $13 that had cost $7 when purchased several years ago. A cash dividend was paid during 2011 and the company repurchased $39 of its own stock. Groton did not retire any bonds during 2011.

Kazaam Company, a merchandiser, recently completed itscalendar-year 2011 operations. For the year, (1) all sales arecredit sales, (2) all credits to Accounts Receivable reflect cashreceipts from customers, (3) all purchases of inventory are oncredit, (4) all debits to Accounts Payable reflect cash paymentsfor inventory, and (5) Other Expenses are paid in advance and areinitially debited to Prepaid Expenses. The company%u2019s balancesheets and income statement follow.

KAZAAM COMPANY
Comparative Balance Sheets
December 31, 2011 and 2010
2011 2010
Assets
Cash $ 49,200 $ 74,000
Accounts receivable 65,810 55,000
Merchandise inventory 276,000 251,000
Prepaid expenses 1,500 1,900
Equipment 159,000 107,500
Accum. depreciation%u2014Equipment (35,750) (46,000)


Total assets $ 515,760 $ 443,400


Liabilities and Equity
Accounts payable $ 59,835 $ 112,000
Short-term notes payable 10,000 6,000
Long-term notes payable 70,000 49,000
Common stock, $5 par value 162,250 150,250
Paid-in capital in excess of par, common stock 36,000 0
Retained earnings 177,675 126,150


Total liabilities and equity $ 515,760 $ 443,400



KAZAAM COMPANY
Income Statement
For Year Ended December 31, 2011
Sales $ 582,500
Cost of goods sold 289,000

Gross profit 293,500
Operating expenses
Depreciationexpense $ 20,000
Otherexpenses 133,600 153,600


Other gains (losses)
Loss on sale ofequipment 5,375

Income before taxes 134,525
Income taxes expense 25,500

Net income $ 109,025


Additional Information on Year 2011 Transactions
a.
The loss on the cash sale of equipment was $5,375 (details inb).
b.
Sold equipment costing $47,250, with accumulated depreciation of$30,250, for $11,625 cash.
c.
Purchased equipment costing $98,750 by paying $35,000 cash andsigning a long-term note payable for the balance.
d.
Borrowed $4,000 cash by signing a short-term note payable.
e.
Paid $42,750 cash to reduce the long-term notes payable.
f.
Issued 2,400 shares of common stock for $20 cash per share.
g. Declared and paid cash dividends of$57,500.

Required:
Prepare a complete statement of cash flows using a spreadsheetreport its operating activities using the indirect method. (Leaveno cells blank - be certain to enter "0" wherever required. Omitthe "$" sign in your response.)

a. Net income was $109,025.
b. Accounts receivable increased.
c. Merchandise inventory increased.
d. Prepaid expenses decreased.
e. Accounts payable decreased.
f. Depreciation expense was $20,000.
g.
Sold equipment costing $47,250, with accumulated depreciation of$30,250, for $11,625 cash. This yielded a loss of $5,375.
h.
Purchased equipment costing $98,750 by paying $35,000 cash and (i.)by signing a long-term note payable for the balance.
j. Borrowed $4,000 cash by signing a short-termnote payable.
k. Paid $42,750 cash to reduce the long-termnotes payable.
l. Issued 2,400 shares of common stock for $20cash per share.
m. Declared and paid cash dividends of$57,500.


KAZAAM COMPANY
Spreadsheet for Statement of Cash Flows
For Year Ended December 31, 2011
December
31, 2010 Analysis of Changes December
31, 2011

Debit Credit
Balance sheet%u2014debit bal. accounts
Cash $ $ $ $
Accounts receivable
Merchandise inventory
Prepaid expenses
Equipment


$ $


Balance sheet%u2014credit bal. accounts
Accum.depreciation%u2014Equip. $ $
Accounts payable
Short-term notes payable
Long-term notes payable
Common stock, $5 parvalue
Paid-in capital in excess of
par value, commonstock
Retained earnings


$ $


Statement of cash flows
Operating activities
Net income
Increase in accts.receivable
Increase in merch.inventory
Decrease in prepaidexpenses
Decrease in accountspayable
Depreciation expense
Loss on sale ofequipment
Investing activities
Receipt from sale ofequipment
Payment to purchaseequipment
Financing activities
Borrowed on short-termnote
Payment on long-termnote
Issued common stock forcash
Payments of cashdividends
Noncash investing and financing activities
Purchase of equip. financed
by long-term notepayable


$ $