Mid-Term Exam - ANSWER ANY TWO QUESTIONS
Question 1 - Match the organizations on the left with the functions on the right. Each function should be used only once.
a.
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_Financial accounting
_Management accounting
_Financial reporting
_Financial statements
_General-purpose assumption
_Integrity
_Internal control
_Public accounting
_Bookkeeping
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a. Statement of financial position (balance sheet), income statement, statement of cash flows.
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b. The segment of the accounting profession that relates to providing audit, tax, and consulting services to clients.
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c. The area of accounting that refers to providing information to support external investment and credit decisions.
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d. The procedural aspect of accounting that involves keeping detailed records of business transactions, much of which is done today by computers.
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e. Procedures and processes within an organization that ensure the integrity of accounting information.
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f. A broad term that describes all information provided to external users, including but not limited to financial statements.
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g. The area of accounting that refers to providing information to support internal management decisions.
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h. The fact that the same information is provided to various external users, including investors and creditors.
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i. An important quality of accounting information that allows investors, creditors, management, and other users to rely on the information.
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b.
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Institute of Internal Auditors
Securities and Exchange Commission
American Institute of CPAs
Institute of Management Accountants
Financial Accounting Standards Board
American Accounting Association
Public Company Accounting Oversight Board
International Accounting Standards Board
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a.The group that creates and promotes International Financial Reporting Standards (IFRSs).
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b.Professional association of Certified Public Accountants.
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c.Organization consisting primarily of accounting educators that encourages improvements in teaching and research.
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d.International organization dedicated to the advancement of internal auditing.
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e.Private-sector organization that establishes accounting standards.
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f.The body charged with setting auditing standards for audits of public companies.
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g.Organization dedicated to providing members personal and professional development opportunities in the area of management accounting.
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h.Government agency responsible for financial reporting by publicly held companies.
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C. The following list of balance sheet items are in random order for Alexander Farms, Inc., at September 30, 2015:
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Land
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$460,000.00
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Gates
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$26,570.00
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Barns and Sheds
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$78,300.00
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Irrigation System
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$15,125.00
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Notes Payable
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$300,000.00
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Cash
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$16,710.00
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Account Receivables
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$22,365.00
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Cows
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$100,780.00
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Guava Trees
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$76,650.00
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Caterpillars
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$42,970.00
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Account Payable
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$70,095.00
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Retained Earnings
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?
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Property Tax Payable
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$9,135.00
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Wages Payable
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$820.00
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Capital Stock
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$270,000.00
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Instructions
a. Prepare a balance sheet by using these items and computing the amount for Retained Earnings. Include a proper heading for your balance sheet.
b. Assume that on September 30, immediately after this balance sheet was prepared, a tornado completely destroyed one of the barns. This barn had a cost of $14,000 and was not insured against this type of disaster. Explain what changes would be required in your September 30 balance sheet to reflect the loss of this barn.
Question 2A - The Balance Sheet items for Franklin's Bakery were as follows at August 1, 2015.
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Accounts payable
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$10,800.00
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Equipment and Fixtures
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$35,000.00
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Accounts Receivables
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$10,260.00
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Land
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$57,000.00
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Building
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$81,000.00
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Notes Payable
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$65,400.00
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Capital Stock
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$70,000.00
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Salaries Payable
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$7,900.00
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Cash
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$6,940.00
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Supplies
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$4,600.00
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During the next two days, the following transactions occurred:
Aug. 2 Additional capital stock was sold for $20,000. The accounts payable were paid in full. (No payment was made on the notes payable or salaries payable.)
Aug. 3 Equipment was purchased at a cost of $6,200 to be paid within 10 days. Supplies were purchased for $1,250 cash from a restaurant supply center that was going out of business. These supplies would have cost $1,890 if purchased through normal channels.
Instructions
a. Prepare a balance sheet at August 1, 2015.
b. Prepare a balance sheet at August 3, 2015, and a statement of cash flows for August 1-3. Classify the payment of accounts payable and the purchase of supplies as operating activities.
c. Assume the notes payable do not come due for several years. Is Franklin Bakery in a stronger financial position on August 1 or on August 3? Explain briefly.
Question 2B - The balance sheet items of The Sweet Shop (arranged in alphabetical order) were as follows at the close of the business on September 30, 2015:
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Accounts Payable
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$ 5,800.00
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Furniture & Fixtures
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$9,000.00
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Accounts receivables
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$ 5,000.00
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Land
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$67,000.00
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Building
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$ 48,000.00
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Notes Payable
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?
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Capital Stock
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$ 70,000.00
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Retained earnings
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$15,100.00
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Cash
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$ 5,900.00
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Supplies
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$3,000.00
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The transactions occurring during the first week of October were:
Oct. 3 Additional capital stock was sold for $30,000. The accounts payable were paid in full. (No payment was made on the notes payable.)
Oct. 6 Furniture was purchased on account at a cost of $5,000, to be paid within 30 days. Supplies were purchased for $700 cash from a restaurant supply center that was going out of business. These supplies would have cost $1,000 if purchased under normal circumstances.
Oct. 1-6 Revenues of $8,000 were earned and received in cash. Expenses required to earn the revenues of $4,200 were incurred and paid in cash.
Instructions
a. Prepare a balance sheet at September 30, 2015. (You will need to compute the missing figure for Notes Payable.)
b. Prepare a balance sheet at October 6, 2015. Also prepare an income statement and a statement of cash flows for the period October 1-6, 2015. In your statement of cash flows, treat the purchase of supplies and the payment of accounts payable as operating activities.
c. Assume the notes payable do not come due for several years. Is The Sweet Shop in a stronger financial position on September 30 or on October 6? Explain briefly.
Question 3 - In June 2015, Wendy Winger organized a corporation to provide aerial photography services. The company, called Aerial Views, began operations immediately. Transactions during the month of June were as follows:
June 1 The corporation issued 60,000 shares of capital stock to Wendy Winger in exchange for $60,000 cash.
June 2 Purchased a plane from Utility Aircraft for $220,000. Made a $40,000 cash down payment and issued a note payable for the remaining balance.
June 4 Paid Woodrow Airport $2,500 to rent office and hangar space for the month.
June 15 Billed customers $8,320 for aerial photographs taken during the first half of June.
June 15 Paid $5,880 in salaries earned by employees during the first half of June.
June 18 Paid Hannigan's Hangar $1,890 for maintenance and repair services on the company plane.
June 25 Collected $4,910 of the amounts billed to customers on June 15.
June 30 Billed customers $16,450 for aerial photographs taken during the second half of the month.
June 30 Paid $6,000 in salaries earned by employees during the second half of the month.
June 30 Received a $2,510 bill from Peatree Petroleum for aircraft fuel purchased in June. The entire amount is due July 10.
June 30 Declared a $2,000 dividend payable on July 15.
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Cash
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Retained Earnings
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Accounts Receivable
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Dividends
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Aircraft
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Aerial Photography Revenue
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Notes Payable
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Maintenance Expense
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Accounts Payable
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Fuel Expense
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Dividends Payable
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Salaries Expense
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Capital Stock
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Rent Expense
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Instructions
a. Analyze the effects that each of these transactions will have on the following six components of the company's financial statements for the month of June. Organize your answer in tabular form, using the column headings shown. Use I for increase, D for decrease, and NE for no effect. The June 1 transaction is provided for you:
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Income Statement
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Balance Sheet
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Transaction
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Revenue -
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Expenses =
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Net Income
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Assets =
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Liabilities +
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Owners' Equity
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1-Jun
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Ne
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Ne
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NE
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I
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NE
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I
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b. Prepare journal entries (including explanations) for each transaction.
c. Post each transaction to the appropriate ledger accounts
d. Prepare a trial balance dated June 30, 2015.
Attachment:- Assignment Files.rar