The objective of ACCT 1115 is to provide students with a basic understanding of how to...

  

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The objective of ACCT 1115 is to provide students with a basic understanding of how to read and understand a set of financial statements, demonstrate basic financial statement analysis, and communicate your thoughts and ideas in a written report. In the following pages, you will find excerpts from the published financial statements of Indigo Books & Music Inc. ("Indigo") for the years ended April 3, 2021 and March 28, 2020. The fiscal year of Indigo consists of a 52 or 53 week period ending on the Saturday closest to December 31" (which explains the slight difference in the dates). The financial statements are "consolidated". Don't be intimidated by the terminology-all this means is that Indigo is a "parent" company to some smaller companies it controls through share ownership. To make the financial statements useful for decision making, the financial statements of the parent (Indigo) and all subsidiary companies it owns are "added together" to report the results for the entire "economic entity". (Imagine all companies operating together as if it were one large company!) The financial statements also contain some items which go well-beyond the scope of an introductory accounting course. Examples include "Derivative Assets", Derivative Liabilities" "Right of Use Assets", "Provisions", "Contributed Surplus", "Accumulated Other Comprehensive Income", and "Diluted Earnings Per Share". For purposes of this case study, you do not need to know the specifics of these complex items, so don't get too caught up in the detail. Instead, go back to the "basics" and identify which type of financial statement element the item relates to - is it an asset, liability, or equity item? Remember, an asset is something that will provide future benefit and a liability represents an obligation that will need to be settled at some point in the future. Required: A friend of yours is interested in purchasing some common shares of Indigo and has asked for your help and advice. In an effort to learn more about the company and assess the overall "risk" associated with the investment, your friend has prepared some questions that need to be answered. Prepare a written report that addresses your friends' questions and concerns using the headings in bold below. The responses under each of the headings should be in a written paragraph format and provide clear answers/ recommendations to the questions your friend is asking. Where ratio calculations are required, use year-end amounts (rather than averages) as this will enable you to identify "trends" between the current year and the prior year. Company Overview 1. Is Indigo a sole proprietorship, partnership, or corporation? Identify at least two separate line items within the financial statements which substantiates your conclusion. Why do you think Indigo has adopted this legal form? Identify & discuss two main advantages this legal form provides to the owners of the business. Is Indigo a Merchandiser, Manufacturer, or a Service-Based Company? What information is available on the financial statements to substantiate your conclusion? The objective of ACCT 1115 is to provide students with a basic understanding of how to read and understand a set of financial statements, demonstrate basic financial statement analysis, and communicate your thoughts and ideas in a written report. In the following pages, you will find excerpts from the published financial statements of Indigo Books & Music Inc. ("Indigo") for the years ended April 3, 2021 and March 28, 2020. The fiscal year of Indigo consists of a 52 or 53 week period ending on the Saturday closest to December 31" (which explains the slight difference in the dates). The financial statements are "consolidated". Don't be intimidated by the terminology-all this means is that Indigo is a "parent" company to some smaller companies it controls through share ownership. To make the financial statements useful for decision making, the financial statements of the parent (Indigo) and all subsidiary companies it owns are "added together" to report the results for the entire "economic entity". (Imagine all companies operating together as if it were one large company!) The financial statements also contain some items which go well-beyond the scope of an introductory accounting course. Examples include "Derivative Assets", Derivative Liabilities" "Right of Use Assets", "Provisions", "Contributed Surplus", "Accumulated Other Comprehensive Income", and "Diluted Earnings Per Share". For purposes of this case study, you do not need to know the specifics of these complex items, so don't get too caught up in the detail. Instead, go back to the "basics" and identify which type of financial statement element the item relates to - is it an asset, liability, or equity item? Remember, an asset is something that will provide future benefit and a liability represents an obligation that will need to be settled at some point in the future. Required: A friend of yours is interested in purchasing some common shares of Indigo and has asked for your help and advice. In an effort to learn more about the company and assess the overall "risk" associated with the investment, your friend has prepared some questions that need to be answered. Prepare a written report that addresses your friends' questions and concerns using the headings in bold below. The responses under each of the headings should be in a written paragraph format and provide clear answers/ recommendations to the questions your friend is asking. Where ratio calculations are required, use year-end amounts (rather than averages) as this will enable you to identify "trends" between the current year and the prior year. Company Overview 1. Is Indigo a sole proprietorship, partnership, or corporation? Identify at least two separate line items within the financial statements which substantiates your conclusion. Why do you think Indigo has adopted this legal form? Identify & discuss two main advantages this legal form provides to the owners of the business. Is Indigo a Merchandiser, Manufacturer, or a Service-Based Company? What information is available on the financial statements to substantiate your conclusion?

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Indigo Books and Music is a corporate construct The following are two independent line items from th... View the full answer