Question 1

Referring to the following information, develop a statement of cash flows using the indirect method.

• Net income for the period was $192.
• Depreciation and amortization expense for the period was $130.
• The Board of Directors declared and paid dividends of $165.
• New equipment was purchased during the period at a cost of $410.
• The prior years cash balance was $60.
• Common stock in the amount of $74 was issued during the period.
• An older, unused building was sold. Proceeds of sale were $106 (sold at book value).
• During the period credit sales totaled $8.
• Inventory declined during the period by $19.
• A more aggressive accounts payable policy took effect, resulting in an increase in payables of $22.
• The firms cash balanced at the end of the period was $20.

Question 2

A local company received its bank statement dated June 30, 2022, and reconciled its statement balance to June 30, 2022, balance in its cash account (balance $5,800). This bank reconciliation recognized the following items:

1. Deposits in transit $3,100.
2. Outstanding cheques $4,000.
3. Bank service charges $100.
4. An NSF cheque in the amount of $700.
5. It was found that a cheque in the amount of $560 was incorrectly recorded as $650.

1. What was the balance in the local companys cash account before the bank reconciliation was completed?
2. What was the balance shown on the bank statement before recognizing any of the preceding items (1-5).

Question 3

A local firm issues two bond as follows:

Bond A

$5,000,000 par value with an 8% coupon rate. The yield-to-maturity on bonds at the time that this bond is issued is 10%. The bond has a term of 10 years.

Bond B

$50,000,000 par value bond with an 12% coupon rate. The yield-to-maturity on bonds at the time that this bond is issued is 10%. The bond has a term of 10 years.

1. What is the price of Bond A?
2. What is the general journal entry to record the issuance of Bond A?
3. What is the price of Bond B?
4. What is the general journal entry to record the issuance of Bond B?
5. Does bond discount increase or decrease the total amount of interest expense that will be recognized in future years? Provide an explanation to justify your answer.

Question 5

During the course you have discussed four different inventory cost flow assumptions, weighted-average, FIFO, and LIFO, as well as specific identification. Based on your studies in this course answer the following:

1. Can both LIFO and FIFO be used in international financial reporting standards (IFRS)? Why or why not?
2. Discuss the impact of LIFO and FIFO on the balance sheet and income statement.
3. In recent months there has been much discussion in the media and government about the trend of rising inflation. Assume that you own a company that uses LIFO as its inventory valuation model. If the trend towards high prices continues in the economy, what will be the impact on your firms cost of goods sold, gross profit, and net income? What will be the impact on your firms balance sheet, specifically inventory and current ratio?

Question 4

	Coke	Pepsi
Net Revenue	$33.014	$70.372
Net Income	7,747	7,120
Total Assets, Jan. 1st, 20	86,381	78,547
Total Liabilities, Jan. 1st, 20	65,283	63,679
Total Liabilities, Dec. 31st, 20	66,012	79,366
Total Equity, Dec. 31st, 20	21,284	13,552

Calculate and discuss the following:

1. Return on Equity and Return on Assets.
2. Based on your answers to question a, which firm uses financial leverage more effectively?
3. What is each firms debt ratio and debt-to-equity ratio, as at Dec. 31^st?
4. Based on your answers to questions a-c, discuss your findings.