1. 5 marks) Use the information below from Note 12 Inventories and answer the following:

a. Prepare a journal entry to record the write-down of inventories.

b. Give two examples and explain why a write-down of inventories is necessary for Loblaw.

Note 12 Inventories

For inventories recorded as at December 31, 2016, the Company recorded $22 million as an expense for the write-down of inventories below cost to net realizable value. The write-down was included in cost of merchandise inventories sold.

6. f) (3 marks) Calculate the debt-to-equity ratio for 2016. Explain what this ratio measures and why creditors want to see this ratio.

7. g) (10 marks) Answer the following questions:

   1. Loblaw has unlimited number of authorized shares on each class of shares. Why

      do many companies today prefer to have an unlimited authorized number of

      shares? (2 marks)

   2. List and explain three differences between common shares and preferred shares.

      (3 marks)

   3. Based on the information available, are you able to determine the net income for

      the year ended December 31, 2016? Show your detailed calculations or explain

      why not. (2 marks)

   4. The unit price for Loblaws common shares was $70.33 on December 31, 2016

      and $63.92 on December 31, 2015. Note 24 Share Capital (not provided) indicated the following:

      What is the dividend yield for common shareholders in each of 2016 and 2015? If you are a common shareholder, are you happy to see the change and why? (3 marks)

Loblaw Companies Limited Consolidated Balance Sheet As of December 31 (in millions of Canadian Dollars) 2016 2015 $ - 4,115 1,018 64 $ 1,314 241 4,048 4,371 230 $ 10,204 4,322 Assets Current Assets Cash and cash equivalents Short term investments Accounts receivable Inventories Prepaid expenses and other assets Total Current Assets Non-current Assets Fixed assets Intangible assets Goodwill Total Non-current Assets Total Assets 336 $ 9,855 11,592 8,745 3,895 $ 24,232 $ 34,436 11,558 9,164 3,780 24,502 34,357 $ $ $ $ Liabilities Current Liabilities Bankindebtedness Trade payables Provisionsand other liabilities Total Current Liabilities Non-Current liabilities Long term debt and other liabilities Total liabilities 115 5,091 1,736 6,942 143 5,106 1,973 7,222 $ $ $ $ 14,466 21,408 $ $ 14,011 21,233 $ $ 7,913 4,944 112 8,072 4,914 102 Equity Share capital Retained Earnings Contributed surplus Accumulated other comprehensive income Non-controlling interest Total Equity Total Liabilities and Equity 33 23 26 13 $ $ 13,028 34,436 $ $ 13,124 34,357 Loblaw Companies Limited Consolidated Balance Sheet As of December 31 (in millions of Canadian Dollars) 2016 2015 $ - 4,115 1,018 64 $ 1,314 241 4,048 4,371 230 $ 10,204 4,322 Assets Current Assets Cash and cash equivalents Short term investments Accounts receivable Inventories Prepaid expenses and other assets Total Current Assets Non-current Assets Fixed assets Intangible assets Goodwill Total Non-current Assets Total Assets 336 $ 9,855 11,592 8,745 3,895 $ 24,232 $ 34,436 11,558 9,164 3,780 24,502 34,357 $ $ $ $ Liabilities Current Liabilities Bankindebtedness Trade payables Provisionsand other liabilities Total Current Liabilities Non-Current liabilities Long term debt and other liabilities Total liabilities 115 5,091 1,736 6,942 143 5,106 1,973 7,222 $ $ $ $ 14,466 21,408 $ $ 14,011 21,233 $ $ 7,913 4,944 112 8,072 4,914 102 Equity Share capital Retained Earnings Contributed surplus Accumulated other comprehensive income Non-controlling interest Total Equity Total Liabilities and Equity 33 23 26 13 $ $ 13,028 34,436 $ $ 13,124 34,357