FIN 139 Midterm 1 | Course Paper

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1) Morton & Associates

Use the following five transactions for Morton & Associates, Inc. to answer the

question(s).

See the transactions to Morton & Associates.

The journal entry to record the May 9 transaction will include a credit of $1,220 to

A.Furniture and Supplies

B.Cash

C.Accounts Payable

D.Administrative Expenses

2) When using the indirect method, how is the decrease in accounts payable shown on

the statement of cash flows?

A.Operating activity

B.Investing activity

C.Financing activity

D.Noncash investing and financing activity

3) When using the direct method, how is the retirement of bonds payable at their

maturity date shown on the statement of cash flows?

A.Operating activity

B.Investing activity

C.Financing activity

D.Noncash investing and financing activity

4) Occasionally, companies engage in important investing and financing activities

which do not affect cash. If the amount of the transaction is significant, how should it

be disclosed when financial statements are prepared?

A.In a separate section in the cash flow statement

B.In a supplemental schedule of all cash investing and financing activities

C.In a note to the financial statements or in a supplemental schedule

D.The transaction does not need to be disclosed

5) Americana Corporation

The data below is for Americana Corporation for 2014.

Refer to the data for Americana Corporation.

What is the balance of Accounts Receivable at December 31, 2014?

A.$336,000

B.$448,400

C.$458,000

D.$466,000

6) On August 31, Farrell Corporation signed a one-year contract to provide services to

Harris Company for $30,000. Harris will pay for the services on September 1. Using the

accrual basis of accounting, when should Farrell Corporation recognize revenue?

A.September 1 of the current year when the cash is received from Harris

B.On August 31 of the next year when all services have been provided

C.Throughout the year as the revenue is earned

D.At December 31 of the current year, and August 31 of the next year

7) Which internal control procedure is violated when the cashier at the checkout stand

also records the daily receipts in the journal?

A.Segregation of duties

B.Independent review and appraisal

C.Independent verifications

D.Proper authorizations

8) Fennel Flooring purchased office supplies for its showroom during the month of

April for $2,600. The supplies were paid for during April. On April 1, the Supplies

account had a balance of $350. On April 30, supplies on hand amounted to $200.

9) Ending inventory is equal to the cost of items on hand plus

A.Merchandise in transit sold to customers FOB shipping point

B.Merchandise in transit sold to customers FOB destination

C.The cost of all inventory purchased during the period

D.Merchandise purchased in transit with terms FOB destination

10) Balance sheet accounts are also known as which of the following?

A.Nominal accounts

B.Real accounts

C.Temporary accounts

D.Closing accounts

11) What is the minimum number of years for which publicly traded companies must

include the following statements in their annual report filed with the SEC?

Balance Sheet Income Statements and Statements of Cash Flows

A.3 Years 3 Years

B.2 Years 2 Years

C.2 Years 3 Years

D.3 Years 2 Years

12) The collection of accounts receivable results in a(n) _________________________

reported in the operating activities section of the statement of cash flows using the

indirect method.

13) Use the current asset section of the balance sheets of the Breeze Company as of

June 30, 2012 and 2011 presented below to answer the questions that follow.

REQUIRED:

In the spaces provided below, complete a vertical analysis of the current asset section of

Breeze Company’s balance sheets for 2012 and 2011. Your answers should be rounded

to one decimal place, e.g., 10.3%.

14) From an ethical standpoint, if various alternatives are available to report a

transaction, what are some of the questions an accountant should ask about the

alternatives?

15) What section of the statement of cash flows is related to the Stockholders’ Equity

section of the balance sheet? Name four different transactions that are reported in that

section that relate to the statement of cash flows.

16) The _____________________ rate of interest is the rate that bondholders could

obtain by investing in other bonds that are similar to the issuing firm’s bonds.