Umbrella In Coat Company ("UIC") is an umbrella retailer that had recently completed its fiscal year end. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. UIC's fiscal year ended Income Statement and Comparative Balance Sheets are provided below. UMBRELLA IN COAT COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31 Current Year Prior Year Assets Cash Accounts receivable Inventory \begin{tabular}{rr} 5,346,000 & 4,610,000 \\ 9,520,000 & 6,606,000 \\ 16,759,000 & 12,685,000 \\ 1,200,000 & 1,800,000 \\ \hline 32,825,000 & 25,701,000 \\ 15,000,000 & 14,500,000 \\ (3,260,000) & (2,560,000) \\ \hline 44,565,000 & 37,641,000 \\ \hline \hline \end{tabular} Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term note payable Long-term debt Total liabilities \begin{tabular}{rr} 8,564,000 & 6,840,000 \\ 500,000 & 200,000 \\ \hline 9,064,000 & 7,040,000 \\ 900,000 & 300,000 \\ & 18,637,000 \\ 28,601,000 & 25,977,000 \end{tabular} Equity Share capital, $10 par value Share premium Retained earnings \begin{tabular}{cr} 6,850,000 & 5,850,000 \\ 1,430,000 & 1,230,000 \\ 7,684,000 & 4,584,000 \\ \hline 44,565,000 & 37,641,000 \\ \hline \hline \end{tabular} Additional information for the year. (1) Equipment was purchased for the year. UIC settled the payment by signing a long-term note payable of $600,000. The remaining balance was settled by cash. (2) Sold equipment costing $500,000 with accumulated depreciation of $200,000 for $250,000 cash. (3) The loss on the cash sale of equipment was $50,000. (4) Borrowed additional $300,000 cash by signing a short-term note payable. (5) Issued 100,000 shares for $12 cash per share in February. (6) Declared and paid cash dividends of $0.5 per share in November. UIC's management wants to classify payments for dividends as financing activities. Required: a) Prepare a complete Statement of Cash Flows using the indirect method. (14 marks) b) (i) For UIC, identify one non-cash activity that is required to disclose in separate notes. (ii) Explain why it is important to disclose non-cash activities in financial statements. (6 marks) Umbrella In Coat Company ("UIC") is an umbrella retailer that had recently completed its fiscal year end. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. UIC's fiscal year ended Income Statement and Comparative Balance Sheets are provided below. UMBRELLA IN COAT COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31 Current Year Prior Year Assets Cash Accounts receivable Inventory \begin{tabular}{rr} 5,346,000 & 4,610,000 \\ 9,520,000 & 6,606,000 \\ 16,759,000 & 12,685,000 \\ 1,200,000 & 1,800,000 \\ \hline 32,825,000 & 25,701,000 \\ 15,000,000 & 14,500,000 \\ (3,260,000) & (2,560,000) \\ \hline 44,565,000 & 37,641,000 \\ \hline \hline \end{tabular} Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term note payable Long-term debt Total liabilities \begin{tabular}{rr} 8,564,000 & 6,840,000 \\ 500,000 & 200,000 \\ \hline 9,064,000 & 7,040,000 \\ 900,000 & 300,000 \\ & 18,637,000 \\ 28,601,000 & 25,977,000 \end{tabular} Equity Share capital, $10 par value Share premium Retained earnings \begin{tabular}{cr} 6,850,000 & 5,850,000 \\ 1,430,000 & 1,230,000 \\ 7,684,000 & 4,584,000 \\ \hline 44,565,000 & 37,641,000 \\ \hline \hline \end{tabular} Additional information for the year. (1) Equipment was purchased for the year. UIC settled the payment by signing a long-term note payable of $600,000. The remaining balance was settled by cash. (2) Sold equipment costing $500,000 with accumulated depreciation of $200,000 for $250,000 cash. (3) The loss on the cash sale of equipment was $50,000. (4) Borrowed additional $300,000 cash by signing a short-term note payable. (5) Issued 100,000 shares for $12 cash per share in February. (6) Declared and paid cash dividends of $0.5 per share in November. UIC's management wants to classify payments for dividends as financing activities. Required: a) Prepare a complete Statement of Cash Flows using the indirect method. (14 marks) b) (i) For UIC, identify one non-cash activity that is required to disclose in separate notes. (ii) Explain why it is important to disclose non-cash activities in financial statements. (6 marks)
