Cameco Corporation is the world's largest producer of uranium. It also converts the uranium into fuel for light water reactors, as well as Candu reactors. It is a part owner in Bruce Power, which operates a nuclear generating station in Ontario. Total current assets for 2009 and 2008 are $2,527,741 thousand and $2,353,748 thousand respectively. The current liabilities for the same period are $763,057 thousand and $1,566,047 thousand respectively. Its statements of earnings and Note 6, Inventories, for 2009 and 2008 are presented in Exhibit 7-17. Note 2(d) describes Camera's accounting policy for inventory as follows: Inventories of broken ore, uranium concentrates, and refined and converted products are valued at the lower of average cost and net realizable value. Average cost includes direct materials, direct labour, operational overhead expenses and depreciation, depletion and reclamation. Net realizable value for finished products is considered to be the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
In Exhibit 7-17
Consolidated Statements of Earnings

Required:
a. Calculate the current ratio (CA/CL) for both 2009 and 2008. Comment on the impact that inventory has on this ratio in each year.
b. Calculate the gross profit percentage for 2009 and 2008. Revenues increased over this time period. Have the changes in the cost of products and services sold mirrored the changes in revenue? What effect has this had on the gross profit?
c. The description of the accounting policy for inventory states that the average cost includes an expense called "reclamation." When a company closes a mine, it is required by law to perform an environmental cleanup, which may include revegetation of the area and re-sculpting of rock stockpiles to improve water runoff. Why would these costs be accrued and included in the cost of inventory production while the mine is still in operation?

Transcribed Image Text:

' Recall note 25 2009 2008 For the years ended December 31 Mdn thousa excet per share amounts Revenue from Products and services 2,314,985 $2,182,553 Expenses Products and services sold Depreciation, depletion and reclamation Administration Exploration Research and development Interest and other note IS] (Gains) losses on derivatives [note 27 Cigar Lake remediation Gain on sale of assets [note 16) 1,324,278 240,643 135,558 49,061 630 (12,470 243,804 17,884 560) ,511,214 803,771 (36,912 766,859 52,897 (3,035) 716,997 382,425 $1,099,422 1, I 46,462 207,453 86,392 53,224 4,998 93,281 202,651 11,369 4,097) 1,801,733 380,820 (39,273) 341,547 (24,357) (245) 5 366,149 83,968 $450,117 Earnings from continuing operations Other expense Inote 17 Earnings before income taxes and minority interest Income taxxpse (recovery) note 18 Minority interest Earnings from continuing operations discontinued operations Inote 25) Net earnings Net earnings per share lnote 28] Basic Discontinued operations Total basic earnings per share 1.84 0.99 S2.83 $1.05 0.24 $1.29 Diluted Continuing operations Discontinued operations Total diluted earnings per share $1.84 0.98 $2.82 S1.04 0.24 $1.28