Questions and Answers of Understanding Financial Accounting

Sanjay Supplies Limited is concerned about its ability to pay its debts. Selected financial information follows.RequiredAnalyze the information and explain why Sanjay is experiencing problems with
According to its 2020 annual financial statements, BRP Inc. designs, develops, manufacturers, and sells powersport vehicles and marine products worldwide. BRP’s 2020 financial statements contained
Explain why a company’s cash flows from operating activities could be negative and whether this is something that financial statement users should be concerned about.
Explain whether it is possible for a company to have negative cash flows from operating activities while being profitable.
During the year, a company’s accounts payable increased, which was partially offset by increases in accounts receivable and inventory. Explain the impact that these changes would have on the
Saputo Inc. is a Montreal-based producer and distributor of dairy products, including cheese and yogourt products. According to the company’s website, it is “one of the top ten dairy processors
Explain how a company’s cash flows from operating activities could increase when its profitability is decreasing.
Identify and explain two actions that a company’s management could take that would improve cash flows from operating activities, but that could be detrimental to the company in the long term.
Explain why operating cash flows are often lowest when a company’s sales are growing rapidly.
You are meeting with your introductory accounting study group when one of the group members states:“The balance in a company’s allowance for expected credit losses account represents the amount
Clean Sweep Ltd. manufactures several different brands of vacuum cleaners, from hand-held models to built-in central vacuums. It sells its products to distributors across Canada on credit, giving
A company has determined that the length of time a receivable is outstanding is the most appropriate credit risk characteristic for determining expected credit losses. The following is an aging
One of your cousins owns Parcher Supplies Ltd. (PSL). She has asked for your help in preparing PSL’s bank reconciliation for the month of October and gathered the following information:• PSL’s
Lowrate Communications is in the cellular telephone industry. The following selected information has been compiled for the company (in thousands of dollars):Required a. In each of the three
On December 31, 2023, Mills Manufacturing Ltd. had a $190,000 balance in its Accounts Receivable and a $9,400 balance in its Allowance for Expected Credit Losses. During 2024, the company made total
Follow your instructor’s guidelines for choosing a company, and do the following: a. Prepare an analysis of the company’s cash (and cash equivalents, if applicable), gross accounts
M&D Inc. began operations in January 2023. All of the company’s sales are made on account. At the end of its first year of operations, the company’s trial balance at December 31, 2023, showed
The following amounts were reported by Moksh Ltd. in its most recent statement of financial position:The company had sales of $860,000 in 2024 and $740,000 in 2023. All sales were on
First Ownership orders merchandise from several suppliers from around the world. Each of the suppliers has different shipping or transportation terms. At the end of December, First Ownership had the
You are the CEO of a building supply company that sells on account to both commercial builders and hardware stores across Western Canada. You are reviewing the financial statements with the CFO. She
On December 31, 2023, Ajacks Company reported the following information in its financial statements:Accounts receivable............................................$1,193,400Allowance for expected
CAE Inc. designs, manufactures, and sells simulation equipment; sells services; and develops training solutions for the civil aviation and defence industries. Its revenues come from the sale of
Wascana Photography Services sells and services a variety of high-end photography equipment for professional photographers. An inventory count is conducted each year end to verify the information
You are sitting on the board of a local not-for-profit organization. The auditors have just completed their work and provided the board with a number of recommendations. One of them stated:“We
What is an allowance for expected credit losses? Your explanation should include what type of account it is, why it is created, and how it is used.
Costless Company sells discounted shoes to the fashion-oriented consumer. The following schedule relates to the company's inventory for the month of March:Costless Company uses the perpetual
Lara’s Gentle Clothing (LGC) sells gently used women’s clothing. LGC receives used clothing from individuals to display in the shop. LGC keeps 40% of the selling price and pays the remaining 60%
The following information relates to eCycle Ltd.’s inventory transactions during the month of August.All of the units sold were priced at $2,000 per unit.Required a. eCycle Ltd. uses the
The following selected information has been compiled for Sherwood Park Inc. Sherwood Park owns a series of discount clothing stores in Western Canada.You are the new accountant hired by Sherwood
One of your company’s largest customers, Big Mart Ltd., has just announced new delivery and freight conditions for all of its suppliers (which it refers to as vendors). These include the following
At the beginning of its operations in July 2024, Wheaton Pet Shop Ltd. began with 9,500 units of inventory that it purchased at a cost of $15.00 each. The company’s purchases during July were as
Brandon’s Bentwood Furniture Company designs, makes, and sells custom furniture. The cost of the special resin used to finish the furniture has been increasing over the past 12 to 18 months. For
At the beginning of its operations in March 2024, Mastiff Supplies Ltd. began with 7,500 units of inventory that it purchased at a cost of $7.00 each. The company’s purchases during March were as
Follow your instructor’s guidelines for choosing a company and do the following: a. Identify the nature of inventory carried by the company. Does the company report more than one
You are in a board meeting when the CFO states the following: “Despite the increase in sales, the company reported a decline in its gross profit rate, since much of the gain occurred in the
Potash Ontario Company (POC) is a Canadian company that manufactures and sells potash globally. At the end of 2024, POC’s chief financial officer noted that global prices for potash had declined
Seismic Activity Metrics Ltd. lost most of its inventory in an earthquake and subsequent fire that destroyed the company’s warehouse and retail store in 2024. Fortunately, the accounting records
Canadian Paper Company (CPC) produces newsprint in its paper mills. At the end of 2024, CPC’s chief financial officer noted that the international market price of newsprint had dropped
The following information was taken from the accounting records of Chicoutimi Ltée and Jonquière Ltée at December 31, 2024. The two companies are competitors.Required a. Calculate the gross
Slick Snowboards Company reported sales of $700,000 in the first quarter of 2024. The company has never implemented an inventory system so the controller does not know how much inventory is actually
Headstrong Hardware lost most of its inventory in an electrical fire that destroyed the company’s warehouse and retail store in 2024. Fortunately, the accounting records were backed up on the
On October 13, 2024, a fire destroyed one of Wetland Company’s warehouses, including all of the inventory stored there and in the adjacent lumber yard. The fire did not affect the inventory held at
On April 25, 2024, a flash flood destroyed one of High River Company’s warehouses, including all of the inventory inside. The flood did not affect the inventory held at the company’s other
Explain, in your own words, how shrinking their package sizes helps some foods companies to maintain their gross margin ratios.
Presented below are the balances from Elsie’s Electronics Ltd.’s general ledger as at September 30, 2024:Required a. Prepare the necessary closing entries for Elsie’s Electronics at
High Liner Foods Inc. operates in the North American packaged foods industry and primarily processes and markets frozen seafood and distributes products to retail and food service customers. Exhibit
Saputo Inc., which is headquartered in Montreal, produces, markets, and distributes dairy products in markets around the world. Exhibit 3.28 contains an excerpt from the company’s consolidated
North West Company Inc. is a leading retailer to underserved rural communities and urban markets in Northern and Western Canada and internationally. Its stores offer a broad range of products and
Big Rock Brewery Inc. is a regional producer of premium craft beers and cider, which are sold across Canada. Exhibit 3.31 contains an excerpt from the company’s consolidated financial statements
Classifying items on financial statements Use the same abbreviations as in AP1-5A to answer the following question.Data from in AP1-5A CA Current assetsNCA Non-current
Spin Master Corp. is a Toronto-based children’s entertainment company. The company designs, manufactures, and markets toys and digital games, as well as creating and producing entertainment
While studying with one of your classmates, they ask you the following question: “The way the instructor explained the use of debits and credits seems backward to me. Credits decrease assets,
Maple Leaf Foods Inc. produces value-added meat products for customers across North America, the United Kingdom, and Japan. Exhibit 4.15 presents the company’s consolidated statements of earnings
In the middle of January 2025, Mark Mbeke, the owner of Mbeke’s Hardware Store, decided to expand the business by buying out a local lumberyard. To finance the purchase, Mark had to obtain
Gildan Activewear Inc. is a Montreal-based company that manufactures and sells activewear, socks, and underwear. The company’s brands include Gildan, Gold Toe, and Anvil. The company also
You are studying with some classmates and one of them states the following:“If a company has a large retained earnings balance, this signals that the corporation has been profitable in the past and
High Liner Foods Inc. processes and markets seafood products throughout Canada, the United States, and Mexico under the High Liner and Fisher Boy brands. It also produces private label products and
For the company you selected in RI3-5, find at least three articles in the financial media that discuss the nature of this company’s markets and that forecast what the future may be for this sector
Explain the purpose of the Income Summary account. Why is it used in the closing entry process?
The following are independent situations. 1. You bought a printer from Best Buy’s online site and paid with your credit card on June 14, 2024. The printer was delivered on June 18. You paid
DC Systems Ltd. manufactures and sells security screening systems to government agencies across North America. The company’s parcel and small cargo X-ray systems are used to inspect freight and
The following are independent situations. 1. The insurance policy on your car starts February 1, 2024, and covers one year. You paid the insurance company $1,800 on January 28, 2024. 2.
TreeHold Corp. designs and builds custom harvesting equipment for logging companies across Canada. The company, which is publicly traded, has a May 31 year end.On February 18, 2024, TreeHold signed a
Furniture Land Inc. is a producer and retailer of high-end custom-designed furniture and uses the contract-based approach to revenue recognition. The company produces only to special order and
Best Snacks Inc. is a publicly traded snack food company focused on snacks and candies from around the world. On a monthly basis, the company boxes snacks and candies from a different country, along
Explain the meaning of “performance obligation.”
GoWeb IT Inc. is a public company that manufactures and sells IT systems and also provides IT training and support. GoWeb’s customers can purchase IT system hardware or support services separately,
Millionaire Ride Ltd. operates an online booking service for luxury car rentals around the world. Users of the company’s website booked luxury cars totalling $8.4 million in 2024. Bookings are
Beach Life Ltd. operates an online booking service restricted to beachfront properties around the world. Users of the company’s website booked beach rentals totalling $7.8 million in 2024. Bookings
The statement of income for DiTuri Manufacturing Inc. for the years 2022 to 2024 is presented below.RequiredCalculate the missing amounts on the statement of income. Sales revenue Cost of goods
The statement of income for Primitivo Winery Inc. for the years 2022 to 2024 is presented below.RequiredCalculate the missing amounts on the statement of income. Sales revenue Cost of goods
The following account balances are taken from Ballistik Ltd.’s adjusted trial balance at January 31, 2024:Required a. Prepare a single-step statement of income for the year ended January 31,
The following account balances are taken from Sherwood Ltd.’s adjusted trial balance at June 30, 2024:Required a. Prepare a single-step statement of income for the year ended June 30,
Cartier Custom Homes Inc. manufactures and sells pre-fab homes. These homes are manufactured in a controlled environment to ensure a consistent high quality, which results in greater customer
You have been provided with the following account balances for Webber Ltd. for the years ended November 30, 2024 and 2025:Required a. Prepare a multi-step, comparative statement of income for
Kohlrabi Electronics Ltd. operates an online electronics business selling hardware and software. Customers confirm the goods ordered and pay for their purchase before Kohlrabi ships the merchandise
Kabili Bites Ltd. operates a chain of restaurants across Canada. Most of the company’s business is from customers who enjoy in-restaurant lunches and dinners and pay before they leave. The company
Navaria Inc. manufactures and sells chairlift mobility aids. These are chairlift systems designed for in-home use to aid persons with mobility challenges. The company sells its systems online and
Explain what is meant by stand-alone selling price and how it is determined.
The following information was taken from Egeland Ltd.’s adjusted trial balance as at July 31, 2024:Required a. Prepare a single-step statement of income for the year ended July 31,
The following information was taken from Thor Ltd.’s adjusted trial balance as at July 31, 2024:Required a. Prepare a single-step statement of income for the year ended July 31, 2024. b.
Explain the difference between the consignor and consignee in a consignment arrangement. When would each recognize revenue?
Explain why public companies are required to publicly disclose their financial statements, while private companies are not.
The SEDAR website (www.sedar.com) contains most securities related information required by the Canadian securities regulatory authorities. It is probably your best source for financial statements of
Classifying items on financial statements) Use the following abbreviations to answer this question:CA Current assetsNCA Non-current assetsCL Current liabilitiesNCL Non-current liabilitiesSC Share
Go to a publicly traded company’s website and find the company’s most recent annual report. Answer the following questions:a. What are the major sections of the annual report? b. What are
Classifying items on financial statements) Use the same abbreviations into answer the following question.RequiredClassify the following items according to where they would appear in the financial
Financial statements of Leon’s Furniture Limited/Meubles Léon Ltée Base your answers to the following questions on the financial statements for Leon’s Furniture Limited/Meubles Léon Ltée in
Identifying financing, investing, and operating transactionsRequiredFor a company like Aritzia Inc. provide two examples of transactions that you would classify as financing, investing, and operating
Identifying financing, investing, and operating transactionsRequiredFor a company like Canadian Tire Corporation, provide two examples of transactions that you would classify as financing, investing,
Financial statements of Roots Corporation The major financial statements of Roots Corporation for the year ended January 30, 2021, are included in Exhibits 1.29ARequired a. Find the following
Financial statements of Waterloo Brewing Ltd. Base your answers to the following questions on the 2021 financial statements for Waterloo Brewing Ltd. in Exhibits 1.28AIn the questions below, the year
Calculate the missing statement of financial position amounts in each of the following independent situations: Current assets Non-current assets Total assets Current liabilities Non-current
Financial statements of Gildan Activewear Inc. Excerpts from the 2020 financial statements of Gildan Activewear Inc. are in Exhibits 1.30A.In the questions below, the year 2020 refers to Gildan’s
Indicate whether each of the following items will be reported on the statement of financial position (SFP), statement of income (SI), both the statement of financial position and statement of income
Indicate whether each of the following items will be reported on the statement of financial position (SFP), statement of income (SI), both the statement of financial position and statement of income
Identifying financing, investing, and operating transactionsRequiredFor a company like Bank of Nova Scotia, provide two examples of transactions that you would classify as financing, investing, and
Classifying items on statement of cash flows) Use the following abbreviations to answer this question:O Operating activities itemI Investing activities itemF Financing activities itemRequiredClassify
A member of your study group stated the following:“The costs related to hiring and training a company’s employees would be considered to be an investing activity because the company is investing
Comparing statement of income and statement of financial position accountsRequired a. On what financial statement would you expect to find sales revenue, and what does it represent? b. On

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