/n CHICAGO BOOTH The University of Chicago Booth School of Business ALTERNATIVE ASSIGNMENT Part 1 Dodo Incorporated You are presented with a series of transactions for Dodo Incorporated (referred to as

'Dodo'). Dodo was incorporated in Chicago, IL, USA on July 1, 2020 (i.e., 1/7/2020¹). Dodo's fiscal year ends on 31/12. Requirements: 19 1. Prepare the following: a. All the journal entries including the adjusting and closing entries. b. The appropriate T-accounts 2. Using these T-accounts, prepare the following financial statements for Dodo: a. Comparative Balance Sheets at 31/12/2020 and 31/12/2021 b. Income Statement for fiscal 2021, i.e., for the year ending 31/12/2021. c. Statement of Cash Flows for fiscal 2021, using both direct and indirect methods. 2020 Transactions: 1. 1/7/20: Dodo issues 8,000 shares of $2 par value Common Stock in return for $80,000 in cash. The total par value of the stock should be credited to the common stock account and any excess over par should be credited to the shareholder equity account Additional Paid-In Capital (APIC). 2. 1/10/20: Dodo buys a piece of land for $100,000 in cash. 3. 1/10/20: Dodo signs a contract to rent a building for 12 months at a rate of $1,200 per month. The contract begins on 1/3/21. Dodo makes an initial payment of $6,000 and will pay the remainder of the rental fees at the end of the contract (28/2/22). 4. 1/10/20: Dodo signs an employment agreement with Professor Haresh Sapra. Professor Sapra will begin working on 1/1/21, earning $180,000 per year. He will be paid on the 15th of each month for the prior month's work (e.g., his first paycheck will be issued on February 15th, as payment for January's services). [Assume all of these payments are made – they will not be shown explicitly in this list of transactions.] 1 Note that we will use the following format for dates, i.e., day/month/year so that 1/7/20 means July 1, 2020. Haresh Sapra/Module 1_Assignment Page 1 CHICAGO BOOTH The University of Chicago Booth School of Business 5. 1/11/20: Dodo orders and receives 4,800 cases of merchandise inventory for $252,000 on account. 19 6. 15/11/20: Dodo receives $45,000 in cash from a customer for goods to be delivered in February 2022. 2021 Transactions: 1. 1/1/21: Dodo buys $6,000 of office supplies on account. These supplies are capitalized, i.e., recognized as an asset. 2. 10/1/21: Dodo pays $18,000 cash to the inventory supplier from the 1/11/20 transaction. 3. 1/4/21: Dodo returns $1,000 of office supplies to its supplier and pays the remainder of the balance of the 1/1/21 purchase in cash. 4. 1/7/21: Dodo arranges to buy a corporate jet for $200,000 and will take delivery in June 2022. No cash is exchanged. 5. 1/8/21: Dodo borrows $ 40,000 from the bank. This loan is in the form of a note that is due in two years (31/7/23) and bears interest at the rate of 6% per year. All of the interest and principal is due at the end of the note period. 6. 1/10/21: Dodo receives a $10,000 deposit from a customer for goods to be delivered in February 2022. 7. 1/10/21: Dodo sells the land purchased on 1/10/2020 and receives $80,000 in cash. 8. Dodo delivers goods with a total sales price of $375,000 to customers during 2021, as contracted. This amount includes the goods ordered on 15/11/2020. The remaining goods were sold on account. Dodo collects $257,000 of these sales during 2021 and expects to fully collect the remaining amount. 9. At 31/12/21, Dodo takes a physical inventory and finds the following items on hand: a. $1,500 of the office supplies purchased on 1/1/21. b. $162,000 of the inventory purchased on 1/11/20. 10. On December 31, 2021, Dodo's Board of Directors will declare a dividend payable to shareholders equal to 40% of Dodo's Net Income for 2021. The dividend will be paid in 2022. If the Dodo has a Net Loss for the period, the board of Directors will not declare a dividend. 11. Dodo recognizes taxes at a 21% tax rate during fiscal 2021. If any taxes are owed, they will be paid in January 2022. Haresh Sapra/Module 1_Assignment Page 2 CHICAGO BOOTH The University of Chicago Booth School of Business 19 Part 2 Thaler Incorporated During fiscal 2020, Thaler Inc. appropriately recognized revenues of $500,000 from the sale of Nudge textbooks and cost of sales (i.e., COGS) of $150,000 on textbooks transferred to its customers. The revenue consisted of credit sales and recognition (reversal) of any previously recognized unearned revenue. Thaler also collected cash in advance from customers of $25,000 for textbooks to be delivered in the future. The following information is available about Thaler's Accounts Receivable, Textbook Inventory, Accounts Payable, and Advance from Customers accounts during fiscal 2020 that begins on 1/1/2020 and ends on 31/12/2020: Account Accounts Receivable Inventory Accounts Payable Advance from Customers Requirements: 1/1/2020 $20,000 $5,000 $15,000 $35,000 1. Prepare T-accounts and show all the movements in Accounts Receivable, Inventory, Accounts Payable, and Advance from Customers to explain the changes in each account. 2. Using these T-accounts above, calculate the total cash collected from customers during fiscal 2020 and the cash paid to suppliers of inventory during fiscal 2020. 31/12/2020 $15,000 $8,000 $18,000 $45,000 3. Complete the following schedule to reconcile the difference between gross profit calculated on an accrual basis with net cash flows from operations for fiscal 2020: Gross Profit (Accrual Basis) +/- Changes in Accounts Receivable +/- Changes in Inventory +/- Changes in Accounts Payable +/- Changes in Advance from Customers Net Cash Flows from Operations Haresh Sapra/Module 1_Assignment $ 350,000 $ Page 3