Transaction Analysis and Financial Statements, Including Dividends
(Alternates are 2-47, 2-48, 2-50, and 2-52.) Consider the following balance sheet of a wholesaler
of children’s toys:
Gecko Toy Company
Balance Sheet, December 31, 20X0
Assets Liabilities and Stockholders’ Equity
Liabilities
Cash $ 400,000 Accounts payable $ 800,000
Accounts receivable 400,000 Stockholders’ equity
Merchandise inventory 860,000 Paid-in capital $360,000
Prepaid rent 45,000 Retained earnings 645,000
Equipment 100,000 Total stockholders’ equity 1,005,000
Total $1,805,000 Total $1,805,000
The following is a summary of transactions that occurred during 20X1:
a. Acquisitions of inventory on open account, $1 million.
b. Sales on open account, $1.5 million; and for cash, $200,000. Therefore, total sales were
$1.7 million.
c. Merchandise carried in inventory at a cost of $1.3 million was sold as described in b.
d. The warehouse 12-month lease expired on October 1, 20X1. However, the company immediately
renewed the lease at a rate of $84,000 for the next 12-month period. The entire rent was
paid in cash in advance.
e. Depreciation expense for 20X1 for the warehouse equipment was $20,000.
f. Collections on accounts receivable, $1.25 million.
g. Wages for 20X1 were paid in full in cash, $200,000.
h. Miscellaneous expenses for 20X1 were paid in full in cash, $70,000.
i. Payments on accounts payable, $900,000.
j. Cash dividends for 20X1 were declared and paid in full in December, $100,000.
Required
1. Prepare an analysis of transactions, employing the balance sheet equation approach demonstrated
in Exhibit 2-3 (p. 49 ) . Show the amounts in thousands of dollars.
2. Prepare an ending balance sheet, a statement of income, and the retained earnings column of
the statement of stockholders’ equity for 20X1.
3. Reconsider transaction j. Suppose the dividends were declared on December 15, 20X1,
payable on January 31, 20X2, to shareholders of record on January 20. Indicate which
accounts and financial statements in requirement 2 would be changed and by how much. Be
complete and specific.

Answer:

Gecko Toy Company

1. Analysis of Transactions, using the balance sheet equation approach:

a. Inventory $1 million Accounts Payable $1 million

b. Accounts Receivable $1.5 million Cash, $200,000 Equity: Sales Revenue  $1.7 million

c. Inventory ($1.3 million) Equity: Cost of goods sold ($1.3 million)

d. Cash ($84,000) Prepaid Rent $63,000 Equity: Rent Expenses $66,000  

e. Equipment (Acc. Depreciation) ($20,000) Equity: Depreciation Expense ($20,000)

f. Cash $1.25 million Accounts Receivable ($1.25 million)

g. Cash ($200,000) Equity: Wages Expense ($200,000)

h. Cash, ($70,000) Equity: Miscellaneous expenses ($70,000)

i. Cash ($900,000) Accounts Payable ($900,000)

j. Cash ($100,000) Equity: Dividends ($100,000)

2. Statement of Income:

Sales Revenue                       $1.7 million

Cost of goods sold              ($1.3 million)

Gross profit                          $0.4 million

Rent Expenses                      ($66,000)

Depreciation Expense          ($20,000)

Wages Expense                 ($200,000)

Miscellaneous expenses     ($70,000)

Total expenses                   $0.356 million

Net income                         $0.044 million

Statement of retained earnings:

Retained earnings               645,000

Net income                            44,000

Dividends                           (100,000)

Retained earnings             589,000

Gecko Toy Company

Balance Sheet, December 31, 20X1

Assets                                                Liabilities and Stockholders’ Equity

                                                          Liabilities

Cash                             $ 496,000   Accounts payable             $ 900,000

Accounts receivable      650,000    Stockholders’ equity

Merchandise inventory 560,000     Paid-in capital                    $360,000

Prepaid rent                     63,000     Retained earnings               589,000

Equipment                       80,000     Total stockholders’ equity   949,000

Total                          $1,849,000     Total                                 $1,849,000

3.  Accounts and Financial Statements that would change:

Assets (Cash) will increase by $100,000 (Balance sheet)

Liabilities (Dividends Payable) will increase by $100,000 (Balance sheet)

Explanation:

a) Data and Calculations:

Gecko Toy Company

Balance Sheet, December 31, 20X0

Assets                                                Liabilities and Stockholders’ Equity

                                                          Liabilities

Cash                             $ 400,000   Accounts payable              $ 800,000

Accounts receivable      400,000    Stockholders’ equity

Merchandise inventory 860,000     Paid-in capital                    $360,000

Prepaid rent                     45,000     Retained earnings               645,000

Equipment                     100,000     Total stockholders’ equity 1,005,000

Total                         $1,805,000      Total                                 $1,805,000

Analysis of Transactions, using the balance sheet equation approach:

a. Inventory $1 million Accounts Payable $1 million

b. Accounts Receivable $1.5 million Cash, $200,000 Equity: Sales Revenue  $1.7 million

c. Inventory ($1.3 million) Equity: Cost of goods sold ($1.3 million)

d. Cash ($84,000) Prepaid Rent $63,000 Equity: Rent Expenses $66,000  

e. Equipment (Acc. Depreciation) ($20,000) Equity: Depreciation Expense ($20,000)

f. Cash $1.25 million Accounts Receivable ($1.25 million)

g. Cash ($200,000) Equity: Wages Expense ($200,000)

h. Cash, ($70,000) Equity: Miscellaneous expenses ($70,000)

i. Cash ($900,000) Accounts Payable ($900,000)

j. Cash ($100,000) Equity: Dividends ($100,000)

Prepaid Rent

Account Title          Debit     Credit

Balance              $45,000

Cash                     84,000

Rent expense                      $66,000

Balance                                  63,000

Type your answer in the box.
For a population with u = 25 and = 5, we would expect 90% of all x's calculated from n = 35 to
fall between
and
(Round to two decimals.)
Do you know the answer?
D Read about this
I know it
Think so
Unsure
No idea

how did you find the fv factor values

An emerging industry is an industry in which a large number of small or medium-sized firms operate and no small set of firms has a dominant market share or creates dominant technologies

a. True
b. False

What type of companies engage in marketing?

Given that the DM price of the ECU was 2.0583 and the DG price of the ECU was 2.3194. Then the DG price of the DM by cross rates is given by:______
a. DM = about 4.73 DG.
b. DM = about .26 DG.
c. DM = about 1.13 DG.odno
d. DM = about .89 DG.

Describe TWO ways in which the above law protects citizens against human
rights violations.
​

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Environment degradation does not consist of​

Using the following transactions, record journal entries, create financial statements, and assess the impact of each transaction on the financial statements.
Jun. 1 Jenna Aracel, the owner, invested $100,000 cash, office equipment with a value of $5,000, and $60,000 of drafting equipment to launch the company in exchange for common stock.
Jun. 2 The company purchased land worth $49,000 for an office by paying $6,300 cash and signing a long-term note payable for $42,700.
Jun. 3 The company purchased a portable building with $55,000 cash and moved it onto the land acquired on June 2.
Jun. 4 The company paid $3,000 cash for the premium on an 18-month insurance policy.
Jun. 5 The company completed and delivered a set of plans for a client and collected $6,200 cash.
Jun. 6 The company purchased $20,000 of additional drafting equipment by paying $9,500 cash and signing a long-term note payable for $10,500.
Jun. 7 The company completed $14,000 of engineering services for a client. This amount is to be received in 30 days.
Jun. 8 The company purchased $1,150 of additional office equipment on credit.
Jun. 9 The company completed engineering services for $22,000 on credit.
Jun. 10 The company received a bill for rent of equipment that was used on a recently completed job. The $1,333 rent cost must be paid within 30 days.
Jun. 12 The company collected $7,000 cash in partial payment from the client billed on June 9.
Jun. 14 The company paid $1,200 cash for wages to a drafting assistant.
Jun. 17 The company paid $1,150 cash to settle the account payable created in on June 8.
Jun. 20 The company paid $925 cash for minor maintenance of its drafting equipment.
Jun. 23 The company paid $9,480 cash in dividends.
Jun. 28 The company paid $1,200 cash for wages to a drafting assistant.
Jun. 29 The company paid $2,500 cash for advertisements on the web during June.

Required:
Journalize the above entires.

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a. P> MC
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c. P < MR
d. All of the above are correct.

According to COSO, an executive's deliberate misrepresentation to a banker who is considering whether to make a loan to an enterprise is an example of which of the following internal control limitations?

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B) At different stages of a project, different materials are needed; therefore, different items become critical as the project develops.
C) Takt times at workstations are dynamic.
D) There is limited space at virtually all sites.
E) All of the above are complicating factors

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Gross pay through August Gross pay for September
a. 6400 800
b. 18,200 2100
c. 11700 8000

Someone from ____________ is most likely to answer the question "Who am I?" by saying, "I am a mother" or "I work for ABC Corporation."

Five welding jobs are waiting to be processed. Their processing times and due dates are given below. Using the critical ratio dispatching rule, in which order should the jobs be processed

Job Processing Time (days) Job due date (days)
A 4 7
B 2 4
C 8 11
D 3 5
E 5 11

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Question 1: Topic - Bank Reconciliation
The 2020 June bank statement of Wheeler Ltd has just been received from its bankers. The owner, Ken
Wheeler, has been quietly monitoring internal controls over few months and has sufficient grounds to
believe that cash is being misappropriated in his business. He has approached an accounting consultant,
Tony, to verify his accounting records and confirm his worst fears. Tony is supplied with the
reconciliation statement at the end of last month together with the cash records and the most recent bank
statement of Wheeler Ltd.
Last Month’s Reconciliation statement is presented below:
Bank Reconciliation Statement as at 31 May 2020
($)
Balance as per Bank Statement 30 April 2020 4328.90 Cr
Add: Outstanding Deposit 1224.50
5553.40
Less: Unpresented Cheques 223.70
Balance per Cash at Bank Account at 31 May 2020 $5329.70 Dr
The total of the cash receipts journal for June is $64,776.30 and the total of the cash payments journal is
$63,265.60. The current bank statement shows that cheques presented and paid amount to $59,725.10,
and total deposits amount to $64,780.60. There are also additional debits on the statement for a
dishonored cheque for $210, and account fees for $20.
Additional information:
An examination of the records reveals that all reconciling items at 31 May 2020 appear in the bank
statement for June, unpresented cheques at 30 June total $7154.40, and the 30 June deposit of
$1950.40 has not been credited by the bank. Your check of the cash journals reveals that addition errors
have been made by the clerks responsible. Receipts should total $65,766.30 and payments should total
$63,185.60.
Required:
a) Prepare the Cash at Bank account of Wheeler Ltd showing the final balance at 30 June 2020.
(4 marks)
b) Prepare the bank reconciliation statement of Wheeler Ltd at 30 June 2020. (4 marks)
c) Advice the owner, Ken Wheeler, whether cash is being misappropriated by any amount, assuming
that the records maintained by the bank are accurate. (3 marks)

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B. Leased assets should be reported as current assets on the balance sheet.
C. The present value of all future lease payments should be reported as a liability on the balance sheet.
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a. True
b. False
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1. The company's current debt ratio is _____.
2. If the company purchases the equipment by taking a loan, the total debt in the balance sheet will _____, and the debt ratio will change to _____.
3. If the company leases the equipment, the company's debt ratio will _____ because the lease is not capitalized.
4. In this case, the company's financial risk will be _____ under a lease agreement as compared to the financial risk in purchasing the equipment by taking a loan.
5. However, if the lease is capitalized, the financial risk under the lease agreement will be _____ as compared to the risk in buying the equipment.

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D. Cost-leadership strategy.
E. Global strategy.

A Consumer Expenditure Survey in the city of Firestorm shows that people buy only firecrackers and bandages. A Consumer Expenditure Survey in 2019 shows that the average household spent ​$44 on firecrackers and ​$12 on bandages. In​ 2019, the reference base​ year, the price of a firecracker was ​$1​, and the price of bandages was ​$3 a pack. In the current​ year, 2020, firecrackers are ​$6 each and bandages are ​$3 a pack.
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