Relating net income to balance sheet changes. Comparative balance sheet data for Bombardier Corporation (Bombardier), a Canadian airplane manufacturer, as of January 31, 2007, and January 31, 2008, appear in the following display, based on Bombardier’s financial reports as of January 31, 2008. Bombardier applies Canadian accounting standards and reports in millions of U.S. dollars. In answering these questions, assume Bombardier uses either U.S. GAAP or IFRS; for the purposes of this problem, this choice will not matter.
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Bombardier Corporation Balance Sheet Data January 31, 2007 and 2008 |
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January 31 |
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2008 |
2007 |
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Total Assets |
20,562 |
$18,577 |
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Liabilities |
17,444 |
15,844 |
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Common Stock |
2,078 |
1,968 |
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Retained Earnings |
1,040 |
765 |
Bombardier declared and paid dividends of $30 million during the year ended January 31, 2008. During the same year, the firm also reported a positive adjustment to Retained Earnings of $12 million. Net income for 2008 was $293 million.
a. Compute net income for the year ended January 31, 2008, by analyzing the change in retained earnings.
b. Demonstrate that the following relation holds: Net Income _ Increase in Assets _ Increase in Liabilities _ Increase in Contributed Capital _ Dividends and Adjustments