Make the following assumptions about Gwinn Company and Harris Company for the purpose of this problem.

1. The two companies ended 2010 with the exact same balances in all of the accounts reported on their balance sheets.

2. The two companies had the same amount of revenue and expenses during 2011, and neither company had any investing or financing cash flow activities.

Required

Shown below are changes in one balance sheet account for each company from 2010 to 2011. Based on the changes in the balances for the given account, decide which company would have ended 2011 with the highest balance in its cash account. Consider each case independently, and explain your answer.

a.

b.

c.

Transcribed Image Text:

Gwinn Company Harris Company 2010 2011 2010 2011 Accounts receivable $20,000 $30,000 S20,000 $25,000 Gwinn Company Harris Company 2010 2011 2010 2011 Accounts payable $10,000 $18,000 S10,000 S12,000 Gwinn Company Harris Company 2010 2011 2010 2011 Prepaid rent S12000 $8,000 S12,000 $6,000