Jeopardy Inc.'s CFO has just left the office of the company president after a meeting about the

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Jeopardy Inc.'s CFO has just left the office of the company president after a meeting about the draft statement of financial position at April 30, 2017, and income statement for the year ended. (Both are reproduced below.) "Our liquidity position looks healthy," the president had remarked. "Look at the current and acid test ratios, and the amount of working capital we have. And between the goodwill write-off and depreciation, we have almost $23 million of non- cash expenses. I don't understand why you've been complaining about our cash situation."
The CFO turns the draft over to you, the newest member of the accounting staff, along with extracts from the notes to the

Draft Notes to the Financial Statements
For the Year Ended April 30, 2017
Note 1. Investments
The company's investments at April 30 are as follows (in $000s):

Note 2. Property, Plant, and Equipment
Additions to property, plant, and equipment for the current year amounted to $2,290,000. Proceeds from the disposal of property, plant, and equipment amounted to $250,000.
Note 3. Intangible Assets-Franchises
Franchise fees are amortized over the term of 20 years using the straight-line method.
Note 4. Accounts Payable and Accrued Liabilities (in $000s)

Note 5. Long-Term Debt (in $000s)

Debentures bear interest at 9% per annum and are due in 2019. Bank term loans bear interest at 8% and the bank advanced $2.2 million during the year.
Note 6. Share Capital
On September 14, 2016, Jeopardy Inc. issued 3.8 million shares with special warrants. Net proceeds from issuing 3.8 million shares amounted to $14,393,000. Net proceeds from issuing 3.8 million warrants amounted to $899,000.
Instructions
Based on the assumption that Jeopardy Inc. follows IFRS and has adopted the policy of classifying interest paid and dividends received as operating activities, and dividends paid as financing activities:
(a) Prepare a statement of cash flows for the year ended April 30, 2017 on a non-comparative basis from the information provided. The CFO wants to use the direct method to report the company's operating cash flows this year. Include all required disclosures.
(b) Prepare a reconciliation of the 2017 net loss to cash provided from (used in) operations. This reconciliation is to be included in a note to the financial statements.
(c) Write a memo to the president of Jeopardy Inc. that explains why the company is experiencing a cash crunch when its liquidity ratios look acceptable and it has significant non-cash expenses.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...

Transcribed Image Text:

JEOPARDY INC. Consolidated Statement of Financial Position April 30, 2017 and 2016 (in $000s) 2017 2016 Assets Cash and 60-day treasury bills Accounts receivable Inventory Income tax receivable Prepaid expenses $ 3,265 23,744 26,083 145 1,402 54,639 $ 3,739 18,399 21,561 1,613 45,312 2017 2016 Investments (Note 1) Property, plant, and equipment (Note 2) Deferred tax asset Intangible assets-franchises (Note 3) Goodwill 5,960 37,332 4,875 4,391 6,962 45,700 2,245 1,911 12,737 $107,197 $114,867 Liabilities Current $6,844 3,243 1,800 11,887 14,900 $ 6,280 4,712 1,200 12,192 14,500 Bank overdraft (temporary) Accounts payable and accrued liabilities (Note 4 Current portion of long-term debt Long-term debt (Note 5) Shareholders' Equity Share capital (Note 6) Retained earnings 78,257 2,153 80,410 $107,197 62,965 25,210 88,175 $114,867 Consolidated Statement of Income and Retained Earnings Years Ended April 30, 2017 and 2016 (in $000s) 2017 2016 Revenue Sales revenue Interest and other $89,821 1,310 91,131 $68,820 446 69.266 Expenses Cost of goods sold General and administrative Salaries and wages expense Depreciation and amortization Loss on impairment (goodwill) Interest Loss on sale of capital assets 52,766 10,415 26,624 10,220 12,737 1,289 394 114,445 39,455 10,982 24,500 11,709 1,521 Loss before equity loss and income tax Investment income (loss) (Note 1) Loss before income tax Income tax benefit Net loss Retained earnings, beginning of year Retained earnings, end of year (23,314) (2,518) (25,832) 2,775 (23,057) 25,210 $ 2,153 88,167 (18,901) 100 (18,801) 5,161 (13,640) 38,850 $25,210 20 172016 Compuco Ltd. (fair value 2017, $4.3 million) Associate's shares, opening balance at equity Equity income (loss) Associate's shares, ending balance at equity $6,962 $5,862 100 5,962 1,516 1.000 $5,960 $6,962 (2,518) 4,444 Other investments, at amortized cost 2017 Accounts payable -suppliers $3,102 Salaries and wages payable141 $3,243 2016 $4,562 150 $4,712 2017 $12,500 2016 $12,500 Debentures Bank term loans, due April 30, 2018, principal repayable at $150,000 a month (2016, at $100,000 a month) 4,200 16,700 3,200 15,700 1,800) (1,200) $14,500 Current maturities $14,900

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a Jeopardy Inc Consolidated Statement of Cash Flows For the Year Ended April 30 2017 000 omitted Cash flows from operating activities Cash received from customers 1 84476 Cash received for interest 13...View the full answer

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