Fin 473 Midterm 2 | Course Paper

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Use the following codes to indicate how the cash flow effect, if any, of each transaction

would be reported on a statement of cash flows if the operating activities section is

prepared using the direct method.

a.Inflow from operating activity

b.Outflow from operating activity

c.Inflow from investing activity

d.Outflow from investing activity

e.Inflow from financing activity

f.Outflow from financing activity

g.Noncash investing and financing activity

h.Not reported on statement of cash flows

Declared cash dividends.

See the transactions for Morton & Associates. Based only on these transactions, what is

the total amount of expenses that should appear on the income statement for the month

of May?

a.$430

b.$850

c. $1,280

d. $1,440

What type of interest is calculated on the balance of the principal only?

a.Equivalent interest

b.Simple interest

c.Future interest

d.Compounded interest

Coglin, Inc. incurred a net loss of $20,000 for 2014. The balance sheet at December 31,

2014, for Coglin, Inc., includes the following items:

A)Determine Coglin’s current ratio and working capital.

B)Beyond the information provided in your answers to “A,” what does the composition

of Coglin’s

current assets tell you about its liquidity.

C)What other information would one need to fully access Coglin’s liquidity?

Utah Corp.

Use the following selected data and additional information from the records of Utah

Corp. to answer the questions that follow.

Additional information:

(1)Equipment with a cost of $15,000 and a book value of $3,000 was sold for $5,000

during 2016.

(2)Common stock was issued to retire bonds payable during 2016.

(3)The only items affecting retained earnings in 2016 were net income and dividends

declared and paid.

Review the data for Utah Corp.

REQUIRED:

(A)What amount was paid to retire bonds payable during 2016?

(B)How would the transaction to retire bonds by issuing common stock be reported on

the statement of cash flows for 2016 for Utah Corp.?

Exeter Corporation purchased a piece of equipment with a price of $80,000 on March 1,

2015. The amounts below are related to the equipment purchase. Match the items below

and explain why each revenue expenditure is not capitalized.

a.This item should be included as part of the cost of the equipment.

b.This item should be considered a revenue expenditure.

It was necessary for an architect to redesign the work space to accommodate the new

equipment. A fee of $6,000 was paid.

What is the correct classification of the account: Discount on Notes Payable?

a.a revenue

b.a contra liability

c.an asset

d.an expense

Identify which of the following would be recorded as external events, recorded as

internal events, or not recorded.

a.Internal event

b.External event

c.Not recorded

The company signs a contract with the marketing firm and pays a retainer.

In 2015, Boone, Inc. sold 1,000 carpets for $50 each. The carpets carry a 2-year

warranty for repairs. Boone estimates that repair costs will average 2% of the total

selling price. What is the amount that would be recorded in the warranty liability

account as a result of selling the carpets during 2015?

a.No liability should be recorded until the carpets are returned for repairs.

b.$ 20

c $1,000

d $500

The use of equipment in a company is an external event.

a.True

b.False

From the following list, identify whether the change in the account balance during the

year would be reported as an operating (O), an investing (I), or a financing (F) activity

or not separately reported on the statement of cash flows (N). Assume that the indirect

method is used to determine the cash flows from operating activities.

a.O – Operating

b.I – Investing

c.F – Financing

d.N – Not separately reported on the Statement of Cash Flows

Taxes payable

Sunshine Farm Supply

Following are selected data from the financial statements of Sunshine Farm Supply:

Refer to the data for Sunshine Farm Supply.

Which of the following would result from a horizontal analysis of its balance sheet?

a.Accounts receivable increased $22,000 or 57.9% during 2016.

b.Accounts receivable is five times larger than Merchandise inventory in 2016.

c.Accounts receivable is 13.3% of total assets for 2016.

d.Merchandise inventory is 2.7% of total assets for 2016.

Select the financial statement on which the user would most likely find the answer to

the question given. (Select all that apply.)

How much depreciation expense did the company report during the year?

a.Income statement

b.Balance sheet

c.Statement of cash flows

d.Statement of retained earnings