Access the annual financial statements for Indigo Books & Music Inc. by going to www.sedar.com. Select your language preference, then choose "Company Profiles" and "I." Scroll down until you locate Indigo Books and Music Inc., then scroll down and click on "View this public company's documents." Scroll down to May 26, 2015, and click on the link "Audited Statements-English."
Instructions
Use these statements to answer the following questions.
(a) Read Note #2 on page 30. Is Indigo a service company or a merchandising company?
(b) Indigo does not disclose in its financial statements or notes if it uses a periodic or perpetual inventory system. Why do you think that readers of the financial statements do not need to know that information? What inventory system do you think it uses and why?
(c) On page 27 of the annual financial statements, Indigo presents the Consolidated Statements of Loss and Comprehensive Loss, which is the same as an income statement. Does Indigo use a single-step or multiple-step income statement format?
(d) What non-operating revenues and non-operating expenses are included in Indigo's income statement?
(e) Calculate Indigo's gross profit margin and profit margin for 2015 and 2014. What does a negative profit margin indicate?
(f) On page 26 of the annual financial statements, Indigo presents the Consolidated Balance Sheets. What amount does the company report for Inventory as at March 28, 2015?
(g) On the Consolidated Statements of Loss and Comprehensive Loss, Indigo reports one amount for operating and administrative expenses. On page 49, Note #15 provides additional information for this amount. List the items for which detailed amounts included in operating and administrative expenses are provided in the note.
(h) In Note # 4, on page 33, Indigo reports under the title "Inventories" that "Costs [of inventory] include all direct and reason- able expenditures that are incurred in bringing inventories to their present location and condition." Other than the purchase price of inventory, what additional costs might be included in the cost of Indigo's inventory? (Hint: refer to the summary of purchase transactions and adjusting entries required.)