Chester is a company dedicated to the transports

BCO123 ACCOUNTING II Task brief & rubrics


Task: Assignment 3 (33,4% of the Final grade)

You must answer all the questions in the proposed business case.


Submission file format: Excel document with all the answers, clearly identifying all steps, results, journals and including comments besides each answer. Submission date: The assignment must be submitted on Turnittin no later than 20th January at 23:59 CEST.

It assesses the following learning outcomes:

• Critically understand the different unusual events that affect the retained earnings. • Knowing how to elaborate an income statement • Knowing how to properly elaborate a statement of cash flow.


Part 1: changes in retained earnings

Chester is a company dedicated to the transports.

On 1st of March 2019, Chester sells its unprofitable segment, a restaurant activity.

This segment generated in 2019 a net loss of $92,000 and its assets sold at a loss of $80,000.

On 1st of May 2019, an earthquake destroyed one of Chester’s offices. The company suffered a loss of $230,000.

On 31st of December 2019, the board of managers decides to change the depreciation method from straight line to 200% declining balance method for the fleet of trucks acquired the 1st of January 2016.

The effect of the change is an additional expense of $96.000

For the while year 2019 Chester reported an income from continuing operations of $1,950,000.

Applicable tax rate is 30%.



Chester had 200,000 shares of capital stock outstanding throughout the year

Question 1: Prepare a condensed income statement including proper presentation of the discontinued restaurant operations and the extraordinary loss. Include all appropriate earnings per share figures. (50 points)


Part 2: Statement of cash flows

Shown below is information from the financial statements for 2019 of Robbe’s Inc:

Accounts Beginning of the year End of the year Accounts receivable $139.000 $100.000 Inventory $160.000 $150.000 Prepaid expenses $12.000 $21.000 Accounts payable $101.000 $97.000 Accrued liabilities $32.000 $30.000 Net sales $1.272.000 Cost of the goods sold $637.000 Expenses (inlcuding depreciation of € 68,000) $302.000

Question 2: Based on the above information, prepare a partial statement of cash flows, showing the computation of net cash flows from operating activities by the indirect method. (40 points)

Question 3: Explain why net income is different from the net cash provided by operations. (10 points)












Descriptor 9-10 The student demonstrates an excellent understanding of the

concepts. 8-8.9 The student demonstrates a good understanding of the concepts. 7-7.9 The student demonstrates a fair understanding of the concepts. 6-6.9 The student demonstrates some, but insufficient understanding of the

concepts. 3-5.9 The student demonstrates insufficient understanding of the concepts.

They may mention some relevant ideas or concepts, although it is clear that the relationship between them is not understood by the student.

1-2.9 The student demonstrates insufficient understanding of the concepts and does not mention any relevant ideas or concepts.

0 The student leaves the question blank or cheats.

95% of the grade based on the approach, calculations and comments, and 5% based on the presentation and look & field of the spreadsheet. Points are at the end of each question.

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