cpa Canada FA3 第10章作业

LESSON 10

Assignment

Question 1 (55 marks)

Note:

In Question 4 of Assignment 9, you completed an exercise very similar to the first part of this question with respect to preparing projections. This assignment builds upon those skills, requiring you to analyze and comment on the results.

Computer question

In early 2013, Jane Lender, an officer of the Commerce Bank, was evaluating the account of Johnson Lumber Co., which uses a line of credit to manage its seasonal requirements. This year the company needed more than its usual credit limit and, unlike previous years, the account was not paid off. Jane has been asked by her manager to study the account and prepare a report. Jane studied the file and found that the company was managed by professional managers with backgrounds in marketing and production. She also identified that the firm’s profits had been growing steadily, though not spectacularly considering the inflation rate. Jane is aware that her manager will require financial analysis to back up her report. Also, considering the executive attention span, she decided to keep her report brief. The Income Statement and Statement of Financial Position of Johnson Lumber Co. is given below.

JOHNSON LUMBER CO.

Income Statement

for years ended October 31, 2010-2012

(thousands of dollars)

201020112012

Net sales € 9,000 €10,500 €13,500

Cost of goods sold

Material and labour 7,725 9,000 11,625

Overhead 180 255 285 Earnings before interest and tax 1,095 1,245 1,590 Interest expenses 45 45 90 Earnings after taxes 1,050 1,200 1,500

Taxes at 50% 525 600 750 Earnings after tax 525 600 750 Dividends 390 450 450 Retained earnings €135 €150 €300

The net sales is arrived after a quantity discount of €90, €105, and €160 respectively i n 2010, 2011, and 2012. Overhead includes the following depreciation.

Plant 120 135 165

Equipment 52 60 75

JOHNSON LUMBER CO.

Statement of Financial Position

as at October 31, 2010-2012

201020112012 ASSETS

Cash €271 €241 €121 Marketable securities 315 15 0 Accounts receivable 1,410 1,515 1,785 Inventories 1,515 1,725 1,965

Total current assets 3,511 3,496 3,871 Loans to dealers 150 150 225

Plant (net of depreciation) 1,650 1,800 2,700 Equipment (net of depreciation) 1,350 1,425 1,515 Total fixed assets 3,150 3,375 4,440

Total assets € 6,661 € 6,871 €8,311 LIABILITIES AND EQUITY

Accounts payable € 1,305 € 1,515 €1,680 Notes payables 150 0 0

Bank loan 0 0 975

Total current liabilities 1,455 1,515 2,655 Ordinary shares 1,206 1,206 1,206 Retained earnings 4,000 4,150 4,450

Total Liabilities and equity € 6,661 € 6,871 €8,311 There are two sections to this question: Section 1 pertains to the financial analysis as specified in the appendix; Section 2 is an additional analysis specified in this assignment.