Accounting Sample Assignment on Company Annual Report
Company name -Leon's Furniture Limited
Year end -December 31, 2010
Main business activity of your Company -Retailer of home furnishings in Canada
What is the stock exchange trading symbol for your company? - LNF
What was the date that the company posted their audited year-end financial statements on the Sedar.com website.
Within a company’s Annual Report, management and its Board will usually provide information regarding the company’s future plans and strategies. Please list three of your company’s plans, goals or objectives for the future (after the year end). Other resources you may wish to consult are business publications, news reports etc. (please note your sources of this information)
Solution:
- Company plans to rapidly expand its presence across Canada; Leon’s recently opened six new superstores across Canada.
- Company is set to buy back its shares, in order to provide liquidity to its shareholders also to buy back the capital at a cheaper rate. It will help in increasing the return on capital employed for the company.
- Leon’s focuses on corporate social responsibility and is making efforts to enhance its public image. Company recently started collecting furniture for family in need.
Find some recent events about your company since this annual report was issued with Sedar (date above). These may be found in the Press Release section of the company’s website or by using resources, such as the Globe and Mail etc. from the business press. Briefly describe three of these events as well as your source(s) of this information:
Solution:
1. Leon's opens six new Superstores across Canada.
2. TSX Approval of Leon's Repurchase Programme for Common Shares.
3. Leon's Furniture opens Regina store.
Using the results for your company’s most recent year end (unless otherwise indicated), please answer the following questions:
1. What was the Total Revenue of your company? $ 699,772,000
2. Did the total Revenue increase or decrease from the previous year and by how much (show calculation)? Revenue decreased by 0.48%
2009= 703,180,000
2010= 699,772,000
Decrease in Revenue= (699,772,000/703,180,000)-1=0.48%
3. What was your company’s Net Income (loss) and if applicable, Comprehensive Net Income (loss)? $63,284,000
4. What was the value of the company’s Total Assets? 566,674,000
5. What was the largest Asset reported? Property, plant and equipment,
6. In which Financial Statement (not notes to the financial statements) would you find information about Dividends? Did your company pay its shareholders any Dividends during the year? If so, how much?
Solution:
Cash flows contains information on Dividends,
Yes, the company paid $0.32 per share to common share holders and $0.18 per share to convertible shareholders.
7. Does the company have any intangible assets? If yes, what type?
Solution:
The company has following types of intangible assets; Customer relationships, Brand name, Non-compete agreement and Computer software
8. Does your company report Inventory? If so, how much ($)? (pg.3) 85,423,000
9. What type of inventory is it? Finished goods, raw materials, supplies?
Solution:
The Company's inventory amount encompasses one category, which are goods purchased and held for resale in the ordinary course of business.
10. What type of Costing method has the company used to value its Inventory?
Solution:
Inventory is valued at the lower of cost, determined on a first-in, first-out basis and net realizable value.
11. What is your company’s Largest Expense account in the current year? (Pg.4) Cost of sales
12. Are the financial statements consolidated? If yes, with whom are they consolidated?
Solution:
The consolidated financial statements include the accounts of the Company and its subsidiaries, Murlee Holdings Limited, Leon Holdings (1967) Limited and Ablan Insurance Corporation, all of which are wholly owned.
13. Record the Accounting Equation using the amounts ($) from your company’s Financial Statements for both year ends presented in the financial statements.
Solution:
Accounting Equation:
Assets= Liabilities+ Equities
For 2010, Accounting Equation is:
Assets= 566,674,000
Liabilities= 156,388,000
Equities= 410,286,000
For 2009, Accounting Equation is:
Assets= 529,156,000
Total liabilities= 154,018,000
Equity= 410,286,000
14. Calculate the following for your company for both years shown on their F/S:
Most Recent Year End | Prior Year End | Show Calculations | |
Working capital | =327,056,000-124,979,000 | =287,317,000-122,558,000 | |
Current Ratio | =327,056,000/124,979,000 | =287,317,000/122,558,000 |
Based on the information above, has the liquidity of your company improved over the prior year? Yes or No and Explain.
Solution:
Yes the liquidity of the company has improved from 2.62 to 2.34. The working capital has also increased to $202,077,000 from $164,759,000
15. What are accrued liabilities? Does the company report any accrued liabilities? If yes, how much and what type(s)?
Solution:
Accrued liabilities $84,065,000
16. Is the company’s Balance Sheet a Classified Balance Sheet, how do you know?
Solution:
Yes, the company’s Balance Sheet is a Classified Balance Sheet. It is written in notes 15 that, the comparative consolidated financial statements have been reclassified from statements previously presented to conform to the presentation of the 2010 consolidated financial statements.
17. What is the balance of Retained Earnings or Deficit at year end? (pg 3) $390,629,000
18. What was the largest Current Liability reported? Accounts payable and accrued liabilities of $84,065,000
19. What was the Total Balance of Long Term Liabilities reported by your company? (Page 3) $31,409,000
20. Does the company have any commitments or contingencies? If yes, briefly describe them in your own words
Solution:
The company has following commitments or contingencies:
- The cost to complete all construction-in-progress.
- The Company is obligated under operating leases for future minimum annual rental payments for certain land and buildings.
- The Company has issued approximately $2,400,000 in letters of credit primarily with respect to buildings under construction which were completed during the year.
- Pursuant to a reinsurance agreement relating to the extended warranty sales, the Company has pledged marketable securities and provided a letter of credit for the benefit of the insurance company.
21. If applicable, what was the balance of the Current Portion of LTD?
$16,882,000
22. What is the dollar value reported for Capital stock and how many shares are issued and outstanding?
Solution:
Dollar value reported for Capital stock= $19,177,000
Issued shares= 70,075,333
23. What is the amount of the company’s Allowance for Doubtful Accounts at year end? If there is none, where did you look?
Solution:
The Company’s allowance for doubtful accounts was $470,000 as at December 31, 2010 [2009 - $300,000].
24. Who are the auditors of this company (page __)? Are the auditors part of this company’s management and do the auditors dictate which accounting policies this company choses (explain)?
Solution:
Auditor of this company is Ernst & young. The auditors are not the part of this company’s management and the auditors do not dictate which accounting policies this company chooses.
25. How much Cash has been generated (or used) from (each) Operating, Investing and Financing Activities?
Solution:
Cash has been generated (or used) from:
Operating Activities= $79,429,000
Investing Activities = $ (36,987)
Financing Activities= $(29,154)
26. The Balance for Cash at the Bottom of the Statement of Cash Flows statement agrees to what other balance in which Financial Statement?
Solution:
Balance for Cash at the Bottom of the Statement of Cash Flows statement agrees to Cash and cash equivalents in the Financial Statement
27. Go to the F/S Note which supports your Long-Term Assets such as “Property, plant and equipment” and copy it into the following chart, if available:
Assets | Cost (in thousands) | Accumulated Depreciation per group of assets if available (in thousands) | Net Book Value (in thousands) |
Prepaid expenses | $ 1,574 | - | $ 1,574 |
Goodwill | $ 11,282 | - | $ 11,282 |
Intangible assets | $ 4,902 | - | $ 4,902 |
Future tax assets | $ 11,951 | - | $ 11,951 |
Property | $392,655 | $182,746 | $ 209,909 |
28. What Depreciation method does your company use to Depreciate their Fixed Assets?
Solution:
Amortization is provided over the estimated useful lives of the assets using the following annual rates and methods:
Buildings = 5% straight-line
Equipment = 20% to 30% declining balance
Vehicles = 30% declining balance
Computer hardware = 20% straight-line
Building improvements over the estimated useful life to a maximum of 15 years
29. Identify and describe one interesting thing you learned about your company from reviewing their financial statements and the accompanying notes.
Solution:
The company is buying back its shares and reducing the equity stock.
