ADMS 3595 AR1 Jeremy Bonifacio
RA13-1
a. At December 31, 2011, current liabilities, which total $1 776 238 000, are made up of the following: Bank indebtedness = $ 172 262 000
Accounts payable and accrued liabilities = 1 109 444 000
Income taxes payable = 26 538 000
Dividends payable = 53 119 000
Current portion of long-term debt = 249 971 000
Provisions = 12 024 000
Associate interest = 152 880 000
b. The nature of current liability provision is accrued liabilities estimated from loss contingencies. Two conditions must be met which are:
1. the future event’s occurrence is “probable” and
2. the measurability of the amounts is reliable.
Provisions are calculated at discount (using pre-tax discount rate) when the value of the money is material. A company is required to disclose it unless odds are remote. Subsequently, from time to time the company needs to monitor these provisions to make any adjustments relating to the estimated amount. The estimated amount may differ from the actual settlements because of the nature of the provision. Provisions include insurance claims, litigation claims, and store closing costs.
c.
Ratios
December 31, 2011
January 1, 2011
January 3, 2010
Analysis:
Although there was a decrease in the current ratio from the beginning of 2011 to the year end, each period has a value of greater than 1 which means the current liabilities are fully covered by the current assets. Current assets consist of cash, accounts receivable, inventory, income taxes recoverable, and prepaid expenses and deposits. Its largest factor relates to the inventory. On the other hand, current liabilities are made up of of bank indebtedness, commercial paper, accounts payable and accrued liabilities, income taxes payable, dividends payable, current portion of long-term debt, provisions, and associate interest. The highest percentage in current liabilities links to accounts payable and accrued liabilities.
Quick ratio’s results, which excludes inventory in the calculation, range from
a. At December 31, 2011, current liabilities, which total $1 776 238 000, are made up of the following: Bank indebtedness = $ 172 262 000
Accounts payable and accrued liabilities = 1 109 444 000
Income taxes payable = 26 538 000
Dividends payable = 53 119 000
Current portion of long-term debt = 249 971 000
Provisions = 12 024 000
Associate interest = 152 880 000
b. The nature of current liability provision is accrued liabilities estimated from loss contingencies. Two conditions must be met which are:
1. the future event’s occurrence is “probable” and
2. the measurability of the amounts is reliable.
Provisions are calculated at discount (using pre-tax discount rate) when the value of the money is material. A company is required to disclose it unless odds are remote. Subsequently, from time to time the company needs to monitor these provisions to make any adjustments relating to the estimated amount. The estimated amount may differ from the actual settlements because of the nature of the provision. Provisions include insurance claims, litigation claims, and store closing costs.
c.
Ratios
December 31, 2011
January 1, 2011
January 3, 2010
Analysis:
Although there was a decrease in the current ratio from the beginning of 2011 to the year end, each period has a value of greater than 1 which means the current liabilities are fully covered by the current assets. Current assets consist of cash, accounts receivable, inventory, income taxes recoverable, and prepaid expenses and deposits. Its largest factor relates to the inventory. On the other hand, current liabilities are made up of of bank indebtedness, commercial paper, accounts payable and accrued liabilities, income taxes payable, dividends payable, current portion of long-term debt, provisions, and associate interest. The highest percentage in current liabilities links to accounts payable and accrued liabilities.
Quick ratio’s results, which excludes inventory in the calculation, range from