Unit 9

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York University *

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3423

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Business

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May 5, 2024

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docx

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4

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WWW.YORKVILLEU.CA Unit 9 Exercises Weight 2% of the final grade Due no later than 11:00 p.m. on Sunday of Unit 9 Objectives [ULO 9.1, 9.2, 9.3, 9.4] Evaluation and Feedback Unit 9 will be marked in its entirety out of 100. The following scale indicates the criteria students are to adhere to, and their relative weights to the assignment overall. Activity/Competencies Demonstrated % of Final Grade Question 1 Explain interest on principal loan /8 Question 2 Identify the component of statement of cash flow /26 Question 3 Explain gain or loss on PP&E /12 Question 4 Prepare complete financial statement /54 Total /100 Exercise Questions Question 9.1 1. What primary factor should a creditor consider when evaluating whether a corporation can pay the interest and principal on a loan at maturity? The factors that are typically in interest in these scenarios are the 5 C’s. These 5 C’s are: Character, Capacity, Condition, Capital, and Collateral. Character is the integrity of the borrower based off of past records, capacity is the capacity to service the debt through cash generating ability, condition regards the market and economic conditions, capital refers to whether the borrower has a sufficient equity invested, and collateral refers to whether this loan can be backed by collateral in the form of other assets. Question 9.2 2. Classify each of the following as an operating, investing, or financing activity under ASPE: Loaning money - Investing Receipt of cash from the issuance of bonds payable - Financing Receipt of cash from the sale of equipment - Investing Payments of acquisition of land - Operating Receiving cash from customers - Operating BUSI 1043 I NTRODUCTION TO F INANCIAL A CCOUNTING 1
WWW.YORKVILLEU.CA Receiving interest revenue - Operating Payments for inventory - Operating Payments for interest - Operating Receipt of cash from the issuance of stock - Financing Dividends paid to shareholders - Financing Receipt of dividend income - Operating Payment of salaries to employees - Operating Payment of taxes - Operating Question 9.3 Three-Eyed Raven Ltd. reported the following on December 31, 2016 (in thousands): 2016 2015 From the comparative balance sheet Property and equipment, net $11,150 $9,590 Long-term notes payable 4,400 3,080 From the statement of cash flows: Depreciation $1,920 Capital expenditures (4,130) Proceeds from sale of property and equipment 770 Proceeds from issuance of long-term note payable 1,190 Payment of long-term note payable (110) Issuance of common shares 383 3. Determine the following items for Three Eyed Raven Ltd. During 2016: Gain or loss on the sale of property and equipment. Amount of long-term debt issued for something other than cash. 9590 + 4130 - 1920 – Y = 11150 -Y = 11150 – 9540 – 4130 + 1920 -Y = -650 Y = 650 Gain = $770 - $650 Gain = $120 3080 + 110 – Y = 4400 -Y = 4400 – 3080 – 110 -Y = 1210 Y = (1210) BUSI 1043 I NTRODUCTION TO F INANCIAL A CCOUNTING 2
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