Question

Coyote Ltd, a private company reporting under ASPE, reported the following for the years ended May 31, 2017, and 2016

Coyote Ltd.

Balance sheet May 31

Assets	2017	2016
Cash	$12,600	$43,000
Accounts recievable	$85,000	$76,000
Inventory	$172,000	$160,000
Prepaid expenses	$5,000	$7,500
Land	$125,000	$75,000
Equipment	$325,000	$190,000
Accumulated depreciation	($68250)	($40,000
Total assets	$656,350	$511,500
Liability and Shareholder's equity
Accounts payable	$43,000	$38,000
Dividends payable	$7,500	$5,000
Income taxes payable	$2,500	$6,000
Mortgage payable	$125,000	$80,000
Common shares	$217,000	$167,000
Retained earnings	$261,350	$215,500
Total liability and shareholder's equity.	$656,350	$511,500

Additional information

1. Profit for 2017 was $108,000

2. common shares were issued for $50,000

3. Land with a cost of $50,000 was sold at a loss of $20,000

4. Purchased land with a cost of $100,000 with a $55,000 down payment and financed the remainder with a mortgage note payable.

5. No equipment was sold during 2017

Instruction:

1. Prepare a cash flow statement for the year using the indirect method.

2. Is it unfavorable for a company to have a net cash outflow from financing activities?

3. Using horizontal analysis, calculate the percentage change between 2016 and 2017.

4. Using vertical analysis, calculate the percentage of the base amount for each year.

5. Based on your calculation in part (3) and (4), identify any significant changes from 2016 to 2017.

Answer 1

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Part 1. Cash Flow
Net Income		$       108,000
Adjustment to Net income:
Depreciation Expenses		$         28,250
Loss on Sale of Land		$         20,000
Increase in Receivable		$          -9,000
Increase in inventory		$        -12,000
Decrease in Prepaid Expense		$            2,500
Increase in Accounts Payable		$            5,000
Increase in Dividend Payable		$            2,500
Decrease in Income Tax Payable		$          -3,500
Net Cash flow from Operating Activities		$       141,750
Cash flow from Investing activities:
Sale of Land (50000-20000 Loss)		$         30,000
Purchase of Land		$        -55,000
Purchase of Equipment		$     -135,000
Net Cash from Investing Activities		$     -160,000
Cash flow from financing activities:
Issue of Common Share		$         50,000
Payment of Dividend	Working below	$        -62,150
Net Cash from Financing Activities		$        -12,150
Net Increase in Cash		$        -30,400
Add: Beginning Balance		$         43,000
Ending Balance		$         12,600
Payment of Dividend
Begingin Retained earning	$               215,500
Add: Net Income	$               108,000
Less: ending Retained Earning	$              -261,350
Payment of Dividned	$                  62,150
Part 2
No. This means company has less dependancy on debt and paying dividends
Part 3 Horizontal Analysis
Assets	2017	2016	%
	A	B	A/B-1
Cash	$                  12,600	$         43,000	-71%
Accounts recievable	$                  85,000	$         76,000	12%
Inventory	$               172,000	$       160,000	8%
Prepaid expenses	$                    5,000	$            7,500	-33%
Land	$               125,000	$         75,000	67%
Equipment	$               325,000	$       190,000	71%
Accumulated depreciation	$                -68,250	$        -40,000	71%
Total assets	$               656,350	$       511,500	28%
Liability and Shareholder's equity
Accounts payable	$                  43,000	$         38,000	13%
Dividends payable	$                    7,500	$            5,000	50%
Income taxes payable	$                    2,500	$            6,000	-58%
Mortgage payable	$               125,000	$         80,000	56%
Common shares	$               217,000	$       167,000	30%
Retained earnings	$               261,350	$       215,500	21%
Total liability and shareholder's equity.	$               656,350	$       511,500	28%
Part 4 Vertical Analysis
			2017	2016
Assets	2017	2016	To be divided by total Assets
Cash	$                  12,600	$         43,000	2%	8%
Accounts recievable	$                  85,000	$         76,000	13%	15%
Inventory	$               172,000	$       160,000	26%	31%
Prepaid expenses	$                    5,000	$            7,500	1%	1%
Land	$               125,000	$         75,000	19%	15%
Equipment	$               325,000	$       190,000	50%	37%
Accumulated depreciation	$                -68,250	$        -40,000	-10%	-8%
Total assets	$               656,350	$       511,500	100%	100%
Liability and Shareholder's equity
Accounts payable	$                  43,000	$         38,000	7%	7%
Dividends payable	$                    7,500	$            5,000	1%	1%
Income taxes payable	$                    2,500	$            6,000	0%	1%
Mortgage payable	$               125,000	$         80,000	19%	16%
Common shares	$               217,000	$       167,000	33%	33%
Retained earnings	$               261,350	$       215,500	40%	42%
Total liability and shareholder's equity.	$               656,350	$       511,500	100%	100%