ACC 303 Week 11 Final Exam Review: Financial Reporting Concepts and Balance Sheet Analysis

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ACC 303 Week 11 Final Exam Review: Financial Reporting Concepts andBalance Sheet AnalysisACC 303 WEEK 11 FINAL EXAM STRAYER UNIVERSITY NEWTRUE FALSE—CONCEPTUAL1.Liquidity refers to the ability of an enterprise to pay its debts as theymature.2.The balance sheet omits many items that are of financial value to the business but cannotbe recorded objectively.3.Financial flexibility measures the ability of an enterprise to take effective actions to alterthe amounts and timing of cash flows.4.Companies frequently describe the terms of all long-term liability agreements in notes tothe financial statements.5.An asset which is expected to be converted into cash, sold, or consumed within one yearof the balance sheet date is always reported as a current asset.6.Land held for speculation is reported in the property, plant, and equipment section of thebalance sheet.7.The account form and the report form of the balance sheet are both acceptable underGAAP.8.Because of the historical cost principle, fair values may not be disclosed in the balancesheet.9.Companies have the option of disclosing information about the nature of their operationsand the use of estimates in preparing financial statements.10.Companies may use parenthetical explanations, notes, cross references, and supportingschedules to disclose pertinent information.11.The accounting profession has recommended that companies use the word reserve onlyto describe amounts deducted from assets.12.On the balance sheet, an adjunct account reduces either an asset, a liability, or an owners’equity account.13.The primary purpose of a statement of cash flows is to report the cash effects ofoperations during a period.14.The statement of cash flows reports only the cash effects of operations during a periodand financing transactions.15.Financial flexibility is a company’s ability to respond and adapt to financial adversityand unexpected needs and opportunities.16.Collection of a loan is reported as an investing activity in the statement of cash flows.17.Companies determine cash provided by operating activities by converting net income onan accrual basis to a cash basis.18.Significant financing and investing activities that do not affect cash are not reported inthe statement of cash flows or any other place.19.Financial statement readers often assess liquidity by using the current cash debt coverageratio.20.Free cash flow is net income less capital expenditures and dividends.MULTIPLE CHOICE—CONCEPTUAL

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