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
