ACCT 526 Midterm Exam Study Guide with

ACCT 526 – Midterm Exam Study Guide with Complete Solutions The objective of profit maximization should be constrained by the requirement that profits be achieved through

• ethical means only
• legal means only
• both legal and ethical means
• any means possible
• None of these. - Correct Answer c. both legal and ethical means

Which of the following is a characteristic of managerial accounting?

• There is an internal focus.
• It measures non-financial information that is useful for controlling costs.
• Subjective information may be used.
• It is broad-based and multidisciplinary.
• All of these. - Correct Answer e. All of these.

The provision of accounting information for internal users is known as

• accounting.
• accounting for planning and control.
• information provision.
• managerial accounting.
• financial accounting. - Correct Answer d. managerial accounting.

Cash outflows from operating activities come from

• acquisition of operating equipment.
• payment for operating costs.
• collection of sales revenues.
• retirement of bonds.
• None of these. - Correct Answer b. payment for operating costs. 1 / 3

Sources of cash include

• profitable operations.
• the issuance of long-term debt.
• the sale of long-term assets.
• the issuance of capital stock.
• All of these. - Correct Answer e. All of these.

Raising cash by issuing capital stock is an example of

• a financing activity.
• an operating activity.
• a non-cash transaction.
• an investing activity.
• None of these. - Correct Answer a. a financing activity.

An increase in accounts receivable is deducted from net income to obtain operating cash flows because

• cash collections from customers were greater than the revenues reported.
• cash collections from customers were less than the revenues reported.
• cash collections increased due to increasing sales.
• cash collections decreased due to declining sales.
• None of these. - Correct Answer b. cash collections from customers were less than the revenues

reported.Which of the following is an investing activity?

• Issuance of a mortgage
• Increase in inventories
• Purchase of land
• Increase in accounts payable
• All of these. - Correct Answer c. Purchase of land

Which of the following is a financing activity?

• Increase in accounts receivable 2 / 3

• Increase in inventories
• Issuance of a mortgage
• Purchase of land
• None of these. - Correct Answer c. Issuance of a mortgage

Cash inflows from operating activities come from

• issuing capital stock.
• gains on the sale of operating equipment.
• the sale of a building for a gain.
• payment for raw materials.
• collection of sales revenues. - Correct Answer e. collection of sales revenues.

The gain on sale of equipment is deducted from net income to arrive at operating cash flows because

• the sale of long-term assets is an operating activity.
• the gain reveals the net book value received.
• all of the cash received from the sale is reported in the operating section.
• All of these.
• None of these. - Correct Answer e. None of these.

The difference between the beginning and ending cash balances shown on the balance sheet

• is added to net income to obtain total cash inflows.
• serves as a control figure for the statement of cash flows.
• is deducted from net income to obtain net cash inflows.
• is the source of all investing and financing activities.
• is both "deducted from net income to obtain net cash inflows" and "the source of all investing and

financing activities". - Correct Answer b. serves as a control figure for the statement of cash flows.Four financial statements required by GAAP (in order in which they must be prepared) - Correct Answer Income Statement Statement of Retained Earnings Balance Sheet Statement of Cash Flows

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