ACCT_301_Week_4_Midterm_Exam_1.docx Page 1  1.(TCO 1) Suppose your company sold $25,000

ACCT_301_Week_4_Midterm_Exam_1.docx  Page 1   1.(TCO 1) Suppose your company sold $25,000 in merchandise to a customer for cash. How does this transaction impact the accounting equation? (Points : 12)  Assets =Liabilities   + Capital  +25000=+25000  It will increase assets & capital by $25000.          2.(TCO 2) Suppose your company sold $50,000 in merchandise to a customer for cash. How does this transaction impact the accounting equation? (Points : 12)  Assets =Liabilities   + Capital  +50000=+50000  It will increase assets & capital by $50000.          Â        3. (TCO 3) Rationalization is one of the components of the fraud triangle. What types of rationalization could a person use to justify misconduct? How can a company protect itself from rationalization as a part of fraud? (Points : 12)  When employees commit a fraud they have justification in their mind which is called as rationalization. It may come in the form of anger, revenge, or moral justification.  They have a feeling that if everyone else is doing the same thing then what is wrong if they also do it.  The company may protect itself from rationalization as part of fraud by making a policy that clearly gives instructions to the employees & it also make employees believe that all employees are treated with merit basis. These policies are effective for both companies & its employees          Â        4. (TCO 4) What is horizontal analysis of financial statements? How does horizontal analysis differ