Question

	WALLIS CORPORATION
	Statement of Financial Position
	As at December 31, 2014
Assets	2014	2013
Cash	$88,600	$49,100
Accounts receivable	85,000	59,400
Prepaid insurance	70,000	60,000
Total current assets	243,600	168,500
Property, equipment and vehicles	360,000	305,000
Accumulated depreciation	-110,400	-105,900
Total non-current assets	249,600	199,100
Total Assets	$493,200	$367,600
Liabilities and Shareholders' Equity
Accounts payable	$21,500	$18,600
Wages Payable	3,000	4,000
Total current liabilities	24,500	22,600
Bank loan payable	50,000	60,000
Total liabilities	74,500	82,600
Common Shares	200,000	200,000
Retained Earnings	218,700	85,000
Total Shareholders’ Equity	418,700	285,000
Total Liabilities & Shareholders' Equity	$493,200	$367,600
	WALLIS CORPORATION
	Income Statement
	For the Year Ended December 31, 2014
Moving revenue		$450,000
Gain on Sale of Equipment		5,000
Total revenues		$455,000
Expenses:
Depreciation expense	59,500
Wage expense	134,000
Vehicle maintenance expense	102,400
Interest expense	5,400	301,300
Net income		$153,700

Additional data:

      (1) Vehicles originally costing $65,000 were sold for $15,000.

      (2) Dividends were paid during the year.

1.A. Cash Flow from (or used by) Investing Activities for Wallis Corporation is?

a. ($95,000)

b. ($105,000)

c. ($110,000)

d. ($120,000)

1.B. Cash Flow from (or used by) Financing Activities for Wallis Corporation is?

a. ($10,000)

b. ($15,400)

c. ($30,000)

d. ($40,400)

2.

BLK Inc. Income statement year ended December 31
	2018	2017	2016
Sales	$94,025	$69,579	$52,654
Cost of goods sold	$67,690	$50,091	$37,906
Gross profit	$26,335	$19,488	$14,748
Operating expenses	$20,020	$14,815	$11,211
Income from operations	$6,315	$4,673	$3,536
Interest expense	$1,198	$886	$671
Income before income tax	$5,118	$3,787	$2,866
Income tax expense	$1,645	$1,217	$921
Net income	$3,473	$2,570	$1,945

2.A.

Assuming the base year is 2016 under horizontal analysis, compute the percentage for Operating expenses for 2018.

a	28.01%
b	35.14%
c	102.45%
d	178.57%

2.B. Using vertical analysis for 2016, compute the percentage for Income from operations.

a	4.45%
b	5.14%
c	6.72%
d	3.57%

Answer 1

Solution: 1A

Therefore, Option b. ($105,000) is the correct answer.

Working:

Purchase of New Property, equipment and vehicles = Ending Amount + Cost of Vehicle Sold - Beginning Amount

= $360,000 + $65,000 - $305,000

= $120,000

Solution: 1B

Therefore, Option c. ($30,000) is the correct answer.

Working:

Payment of Bank Loan = Loan Amount in 2013 - Loan Amount in 2014

= $60,000 - $50,000

= $10,000

Payment of Dividend = Retained Earning 2013 + Net Income - Reatined earning 2014

= $85,000 + $153,700 - $218,700

= $20,000

Solution :2A:

Percentage for Operating expenses for 2018 if base year is 2016 under Horizontal analysis :

Horizontal Analysis % for operatinng Expenses = (2018 Operating Expenses / 2016 Operating Expenses) *100

= ($20,020 / $11,211) * 100

= 178.57 %

Therefore, Option (d) 178.57% is the correct answer.

Solution 2B.

Vertical analysis for 2016, percentage for Income from operations

Percentage of Income from Operation = (Income from Operation 2016 / Gross Sales 2016) *100

= ($3,536 / $52,654) *100

= 6.72%

Therefore, Option (c) 6.72% is the correct answer.