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Comprehensive Learning Assignment 1

Gurkiran Singh

Westcliff University

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BUS622: Financial Statement Analysis

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Dr. Simin Hojat

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May 29, 2021
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Intangible Assets

(Tuovila, 2020) The critical attributes of any intangible asset that a firm may look to

acquire in order to generate cash flows are, identifiability, control (ability to actually obtain

benefits from the asset), and future economic benefits (such as revenues or reduced future costs).

According to IAS 38, firms are required recognize an intangible asset, purchased externally or

created internally, only if: it is probable that the future economic benefits that can be attributed

specifically to the asset will actually come to the entity, and the costs associated with said asset

can be measured reliably. If this isn’t the case then the firms are better off expensing them.

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Falcon Corporation ratios

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With current assets of $400,000 and current liabilities of $275,000, the Current ratio at
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the moment is 1.45

a. Refinanced a $60,000 long-term mortgage with a short-term note.

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a. This will add $60,000 to the current liabilities, changing the current ratio to
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(400k/335k) = 1.19

b. Purchased $108,000 of merchandise inventory with short-term accounts payable.

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a. Since they are investing in assets through a current liability, the ratio will

change as 400k/383k = 1.044

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c. Paid $50,000 of short-term accounts payable.

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a. Cash is being used to pay accounts payable, so the ratio will change as
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350k/225k = 1.55

d. Collected $90,000 of short-term accounts receivable.

a. This will change the ratio as 490k/185k = 2.64

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Ramos Company

a. Profit or loss in 2012 income statement-

The total realized losses of $200,000+$135,000 = $335,000 pre tax. Tax Benefit at

35% = $117,250. So the operating loss will be net of -$217,750.

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Operating Profit $ 475,000

Less Tax @ 35% $ (166,250)
Operating Income $ 308,750
Gain on Disposal $ 375,500
Less Tax @ 35% $ (131,425)

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Net income from disposal $ 244,075

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Total Net Income $ 552,825

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Motor Corporation

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Income before Taxes
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2012 2011
Operating Income $ 900,000 $ 600,000
(add back loss from discontinued division) $ 320,000 $ 250,000
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Total Operarting income $ 1,220,000 $ 850,000

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Less Tax @30% $ (366,000.0) $ (255,000.0)

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Income after Taxes $ 854,000 $ 595,000

Loss from discontinued division $ (320,000) $ (250,000)

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Tax benefit $ 96,000 $ 75,000

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a. Net loss $ (224,000) $ (175,000)

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References

Tuovila, A. (2021, May 19). Amortization of Intangibles. Investopedia.

https://www.investopedia.com/terms/a/amortization-of-intangibles.asp.

Wahlen, J., M., Baginski, S., P., & Bradshaw, M. (2018). Financial reporting, financial statement

analysis, and valuation (9th. ed).

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