Homework Answers
Subsequent events are the events that take place after the reporting period but before the date of issue of the financial statement for that reporting period. Subsequent events are of two types:
1. Type I - The events which provide further evidence pertaining to the conditions that existed on the date of the financial statement (last day of the reporting period). The financial statments are adjusted to account for such events.
2. Type II - The events which provide further evidence pertaining to the conditions that didn't exist on the date of the financial statement (last day of the reporting period). The financial statments are not adjusted for such events but information about the same is provided by way of notes to financial statements.
Classification of the given events in two categories:
A. Flood damage after balance sheet date - Type II event as no related conditions existed on the date of balance sheet.
B. Bankruptcy by the customer during Audit: Type II assuming it is the result of sudden loss sufferred by the customer and there were no indications of deteriorating financial conditions of the cusomter on the balance sheet date. If such assumptions do not hold good, it will be a Type I event.
C. Additional evidence about the conditions that existed at the balance sheet date - Type I as per the definition above.
D. Lawsuit settlement after the balance sheet date - Type I as the lawsuit existed on the balance sheet date.
E. Conditions coming into existence after balance sheet date - Type II as per the definition.
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BRYANT CORPORATION
Balance Sheet
November 30, 2016
1
Assets
2
Current Assets:
3
Cash
$180,000.00
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Accounts receivable
480,000.00
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Less: Allowance for doubtful accounts
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Inventories
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Note
2018
2017
Cash flows from operating activities
£m
£m
% change
Cash generated from operations
32
137.5
200.4
(31.4)
Finance income
0.1
0.1
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(11.2)
(0.9)
Tax received/(paid)
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(16.3)
(108)
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Bryant Corporation was incorporated on December 1, 2015, and
began operations one week later. Before closing the books for the
fiscal year ended November 30, 2016, Bryant’s controller prepared
the following financial statements:
BRYANT CORPORATION
Balance Sheet
November 30, 2016
1
Assets
2
Current Assets:
3
Cash
$180,000.00
4
Accounts receivable
480,000.00
5
Less: Allowance for doubtful accounts
(59,000.00)
6
Inventories
430,000.00
7
Prepaid insurance
15,000.00
8
Total current assets
$1,046,000.00
9
Property, plant, and equipment
426,000.00
10
Less: Accumulated...
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ToyWorks Ltd. is a company that manufactures and sells a single
product, which they call a toodle. For planning and control
purposes they utilize a quarterly master budget, which is
usually developed at least six months in advance of the budget
period. Their fiscal year end is December 31.
During the summer of 2018, Chris Leigh, the ToyWorks controller,
spent considerable time with Pat Frazer, the Manager of Marketing,
putting together a sales forecast for...
Discuss the horizontal analysis in the table below, explaining
why Cash and Cash equivalents have been twice in 2018 than 2017
despite cash from Operating Activities falling by almost one third.
And what risks for doing that?
Horizontal Analysis of Cash Flows
Note
2018
2017
Cash flows from operating activities
£m
£m
% change
Cash generated from operations
32
137.5
200.4
(31.4)
Finance income
0.1
0.1
–
Finance costs
(11.1)
(11.2)
(0.9)
Tax received/(paid)
1.3
(16.3)
(108)
Net cash generated...
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