Accounting for Managers Exam Preparation Guide
Course Introduction
Accounting for Managers is designed to equip future business leaders with essential accounting knowledge and skills necessary for informed decision-making. The course focuses on interpreting financial statements, understanding cost behaviors, and utilizing accounting information for planning, controlling, and evaluating organizational performance. By exploring key topics such as budgeting, financial analysis, performance measurement, and managerial control systems, students learn how to apply accounting concepts to solve real-world managerial problems and support strategic business objectives. Through case studies and practical exercises, the course emphasizes the relevance of accounting data in managerial roles and promotes critical thinking to make effective financial decisions in diverse business settings.
Recommended Textbook
Financial and Managerial Accounting 10th Edition by Belverd E. Needles
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Chapter 1: Uses of Accounting Information and the Financial Statements
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Sample Questions
Q1) The following users of accounting information have an indirect financial interest in the business except
A)regulatory agency.
B)creditor.
C)taxing authority.
D)labor union.
Answer: B
Q2) Chin Company's stockholders' equity equals one-third of the company's total assets.The company's liabilities are $120,000.What is the amount of the company's stockholders' equity?
Answer: Assets = Liabilities + Equity
A = 2/3 A + 1/3 A
2/3 A = $120,000
A = $120,000 ´ 3/2 = $180,000
Equity = $180,000 - $120,000 = $60,000
Q3) Less than 20 percent of the U.S.economy is generated by governmental and not-for-profit organizations.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Measurement Concepts: Recording Business Transactions
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Q1) Receiving cash from a customer for settlement of an Accounts Receivable will
A)decrease Stockholders' Equity.
B)increase net income.
C)increase total assets.
D)not affect total assets.
Answer: D
Q2) Which of the following is a business event that is not considered a recordable transaction?
A)A company receives a product previously ordered.
B)A company pays an employee for work performed.
C)A customer inquires about the availability of a service.
D)A customer purchases a service.
Answer: C
Q3) The double-entry system is possible because all business transactions have at least two equal and opposite aspects.
A)True
B)False
Answer: True
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Chapter 3: Measuring Business Income: Adjusting the Accounts
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Q1) Which of the following accounts could increase as a result of adjusting entries?
A)Prepaid Insurance.
B)Accounts Receivable.
C)Unearned Fees.
D)Office Equipment.
Answer: B
Q2) When a credit sale takes place,
A)a revenue account will increase.
B)liabilities will increase.
C)one asset account will increase and another will decrease.
D)assets will be unaffected.
Answer: A
Q3) A revenue for which the service has been performed but that has not been recorded is a deferred revenue.
A)True
B)False
Answer: False
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Chapter 4: Foundations of Financial Reporting and the
Classified Balance Sheet
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Q1) Current assets divided by current liabilities is known as the A)profit margin.
B)current ratio.
C)working capital.
D)capital structure.
Q2) All of the following must certify that a public company's financial statements are accurate,complete,and not misleading,except for the A)chief financial officer.
B)director of human resources.
C)chief executive officer.
D)independent auditor.
Q3) The current ratio for National Textile is A)1.20.
B)1.75.
C).67.
D)1.50.
Q4) A debt to equity ratio of 0.5 means that one-third of a company's total assets are financed by creditors.
A)True B)False
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Chapter 5: Accounting for Merchandising Operations
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Q1) Adding together the ending merchandise inventory and cost of goods sold gives the cost of goods available for sale.
A)True
B)False
Q2) Computerization has led to a large increase in the use of the perpetual inventory system.
A)True B)False
Q3) The faster goods are sold and collection is made,the shorter the financing period.
A)True
B)False
Q4) Gross margin is the difference between net sales and A)net income.
B)cost of goods sold plus operating expenses.
C)operating expenses.
D)cost of goods sold.
Q5) When the buyer bears the transportation charge,it is called freight-out. A)True B)False
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Chapter 6: Inventories
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Q1) An overstatement of beginning inventory results in
A)no effect on the period's gross margin.
B)an overstatement of gross margin.
C)an understatement of gross margin.
D)a need to adjust purchases.
Q2) In practice,why is it often difficult to apply the retail method in determining the cost of ending inventory?
Q3) Assuming that a periodic inventory system is used,what is cost of goods sold on a FIFO basis?
A)$7,696
B)$7,736
C)$3,664
D)$3,704
Q4) A company has cost of goods available for sale of $250,000,sales of $305,000,and a gross profit percentage of 30 percent.Using the gross profit method,what is the ending inventory?
A)$95,000
B)$50,000
C)$36,500
D)$158,500
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Chapter 7: Cash and Internal Control
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Q1) It is best that the receiving department not be given a copy of the purchase order or the invoice.
A)True
B)False
Q2) Which of the following bank reconciliation items would result in a journal entry?
A)Checks outstanding
B)An adjustment for a check recorded for the wrong amount
C)Deposits in transit
D)A bank error on the bank statement
Q3) A good system of internal control is designed to achieve all of the following except A)efficiency of operations.
B)reliability of financial reporting.
C)compliance with relevant laws and regulations.
D)attainment of target sales.
Q4) A purchase requisition is prepared after a purchase order.
A)True
B)False
Q5) On a balance sheet,what items normally are included in Cash?
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Chapter 8: Receivables
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Q1) The allowance for uncollectible accounts is necessary because
A)a liability results when a credit sale is made.
B)when recording uncollectible accounts expense,it is not possible to predict specifically which accounts will not be collected.
C)management should know how many credit losses have been sustained over the years.
D)uncollected accounts that are written off must be accumulated in a separate account.
Q2) Under the allowance method,uncollectible accounts must be estimated if the matching rule is to be followed.
A)True
B)False
Q3) Under the allowance method,when a specific account is written off,
A)total assets will be unchanged.
B)total assets will decrease.
C)net income will decrease.
D)total assets will increase.
Q4) What purpose is served by a factoring arrangement? What does it mean to factor accounts receivable with recourse?
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Chapter 9: Long-Term Assets
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Q1) If a company's free cash flow is $90,000,net cash flows from operating activities total $220,000,purchases of plant assets total $100,000,and sales of plant assets total zero,what amount is committed to dividends?
A)$20,000
B)$30,000
C)$60,000
D)Impossible to determine from the facts given.
Q2) Under the double-declining-balance method,what is the accumulated depreciation after two years?
A)$38,400
B)$42,400
C)$44,800
D)$51,200
Q3) Free cash flow is
A)a financial ratio.
B)an important measure of a company's ability to finance long-term assets.
C)what remains after deducting dividends declared from net income.
D)an important measure of a company's ability to invest in short-term assets.
Q4) What commitments must a company account for in determining its free cash flow?
Q5) What is goodwill and when may it be recorded?
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Chapter 10: Current Liabilities and Fair Value Accounting
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Q1) Product warranties are an expense of the period in which the product is sold.
A)True
B)False
Q2) The FUTA tax rate most often actually paid by employers is 0.8 percent.
A)True
B)False
Q3) Sales Tax Payable is an example of a(n)
A)estimated liability.
B)contingent liability.
C)trade liability.
D)definitely determinable liability.
Q4) A company enters into a contract to purchase a certain quantity of goods from another company during the following month.At this point,would a liability exist? Explain why or why not.
Q5) Payables turnover is measured in number of days.
A)True
B)False
Q6) Gross earnings minus deductions equal take-home pay.
A)True
B)False
Page 12
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Chapter 11: Long-Term Liabilities
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Q1) What is a capital lease,in substance? How is a capital lease recorded? At what amount is a capital lease recorded?
Q2) The debt to equity ratio is expressed in terms of A)a percentage.
B)dollars.
C)units.
D)times.
Q3) The factor used to calculate the present value of the $1,000,000 is A)10%,20 periods.
B)5%,40 periods.
C)9%,20 periods.
D)4.5%,40 periods.
Q4) When bonds are sold between the interest payment dates,the issuing corporation pays to investors the interest that has accrued since the last interest payment date. A)True B)False
Q5) Unsecured bonds are also known as debentures. A)True B)False
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Chapter 12: Stockholders Equity
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Q1) The par value of stock is an arbitrary amount assigned to each share of stock.
A)True
B)False
Q2) The price/earnings (P/E)ratio is a measure of investors' confidence in a company's future.
A)True
B)False
Q3) Which of the following could be described as both an advantage and a disadvantage of incorporation?
A)Continuous existence
B)Limited liability
C)Double taxation
D)Lack of mutual agency
Q4) Treasury stock usually is recorded at cost when purchased.
A)True
B)False
Q5) Dividends in arrears pertain only to cumulative preferred stock.
A)True
B)False
Q6) Define outstanding stock.
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Chapter 13: The Statement of Cash Flows
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Q1) Transaction 1 would be found on the statement of cash flows in the
A)cash flows from operating activities section.
B)cash flows from financing activities section.
C)noncash investing and financing transactions section.
D)cash flows from investing activities section.
Q2) When preparing a statement of cash flows using the indirect method,a gain on sale of land is deducted from net income to arrive at net cash flows from operating activities.
A)True
B)False
Q3) What elements are used to calculate free cash flow? Indicate whether the element is added or subtracted.
Q4) Determining cash flows from investing activities is the ________ step in preparing the statement of cash flows.
A)First
B)Second
C)Third
D)Fourth
Q5) Which accounts are analyzed to determine cash flows from financing activities?
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) For 20x5,Black & White Corporation had average total assets of $300,000,net sales of $250,000,net income of $20,000,net cash flows from operating activities of $30,000,dividend payments of $15,000,purchases of plant assets of $70,000,and sales of plant assets of $30,000.Using this information,compute (a)cash flow yield, (b)cash flows to sales, (c)cash flows to assets,and (d)free cash flow.Round amounts to one decimal place.
Q2) A quick ratio that is about equal to the current ratio indicates that
A)inventories represent a large portion of current assets.
B)the company has a low inventory turnover.
C)inventories represent a small portion of current assets.
D)the company has a high inventory turnover.
Q3) The choice of accounting methods does not affect cash flows except for possible differences in income taxes.
A)True
B)False
Q4) A common measure of long-term solvency is the A)receivable turnover.
B)asset turnover.
C)debt to equity ratio.
D)current ratio.
Page 16
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Chapter 15: Managerial Accounting and Cost Concepts
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Q1) In a manufacturing company,an accountant's salary is a value-adding cost.
A)True
B)False
Q2) Management accounting information demands more objectivity than financial accounting information.
A)True
B)False
Q3) The four stages of the management process are: planning,performing,evaluating,and communicating.
A)True
B)False
Q4) All manufacturing costs that are assigned to completed (but unsold)products should be classified as
A)materials inventory costs.
B)cost of goods sold.
C)work in process inventory costs.
D)finished goods inventory costs.
Q5) Give two examples of each stage in the management process.
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Chapter 16: Costing Systems: Job Order Costing
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Q1) Financial statements referred by external stakeholders compare actual unit costs with targeted unit costs.
A)True
B)False
Q2) Which of the following is true of activity-based costing?
A)It is also called single-plantwide overhead costing.
B)It is helpful when companies manufacture one product.
C)It categorizes all indirect costs by activity.
D)The total overhead costs accumulate in one cost pool.
Q3) Which of the following tasks succeeds the disposing under- or overapplied overhead?
A)Preparation of financial statements
B)Comparison of actual and allocated overhead amounts
C)Estimation of overhead costs
D)Establishment of predetermined overhead rate
Q4) Which of the following is a document prepared every period for each process?
A)Process cost card
B)Process cost report
C)Process cost control sheet
D)Process cost recognition card
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Chapter 17: Costing Systems: Process Costing
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Q1) The number of equivalent units for direct materials cost using the FIFO costing procedure is the units in beginning work in process inventory minus units started during the period plus units completed during the period.
A)True
B)False
Q2) In a process costing system,percentage-of-completion factors normally are obtained from
A)accounting records.
B)job order cost cards.
C)supervisors in the production departments.
D)time cards.
Q3) Process costing is applicable to production operations that
A)utilize several processes,departments,or work cells in a series.
B)do not assign overhead costs to operations.
C)produce products that are made to order.
D)produce unique products.
Q4) Several Work in Process Inventory accounts are used in a process costing system.
A)True
B)False
Q5) How are costs recognized,matched,and measured in a process costing system?
Page 19
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Chapter 18: Value-Based Systems: Activity-Based Costing and Lean Accounting
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Q1) Nonvalue-adding activity costs do not increase a product's cost because they do not add value to the product.
A)True
B)False
Q2) A manufacturing chain is a path that leads from the suppliers of the materials from which a product is made to the final customer.
A)True
B)False
Q3) Under new methods of management,attempts to continuously improve the work environment come from
A)top management.
B)each department manager.
C)the board of directors
D)everyone in the company.
Q4) In a just-in-time operating environment,the key measure of cost incurred is
A)machine hours.
B)push-through time.
C)throughput time.
D)indirect costs.
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Chapter 19: Cost-Volume-Profit Analysis
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Q1) Linear approximation is a method of converting nonlinear variable costs into linear fixed costs.
A)True
B)False
Q2) The breakeven formula adjusted for profits may be stated as
A)Sales Revenue = Variable Costs Fixed Costs + Profit
B)Sales Revenue = Variable Costs Fixed Costs Profit
C)Variable Costs + Fixed Costs Profit = Sales Revenue
D)Sales Revenue = Variable Costs + Fixed Costs + Profit
Q3) The unit contribution margin of a product cannot be more than its selling price.
A)True
B)False
Q4) How many total dollars of sales must Windblow Company sell to break even,if the selling price per unit is $10,variable costs are $5.00 per unit,and fixed costs are $10,000?
A)$20,000
B)$6,667
C)$10,000
D)$12,000
Q5) Explain what cost-volume-profit analysis is and how managers use it.
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Chapter 20: The Budgeting Process
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Q1) Which of the following do not serve as a source of data while preparing a cash budget?
A)A sales budget
B)Collection records
C)A budgeted balance sheet
D)A budgeted income statement
Q2) If the expected 2014 expense for factory supervision and for utilities costs is $600,000 and $150,000,respectively,then the total for the 2014 overhead budget of Emerald is
A)$930,000.
B)$880,000.
C)$780,000.
D)$750,000.
Q3) Operating budgets are plans used in daily operations.
A)True
B)False
Q4) A budget can contain only financial information.
A)True
B)False
Q5) Describe three benefits budgeting provides to an organization's success.
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Chapter 21: Flexible Budgets and Performance Analysis
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Q1) The balanced scorecard links the perspectives of an organization's stakeholders with the organization's mission and vision,performance measures,strategic plan,and resources.
A)True
B)False
Q2) A performance management and evaluation system is a set of procedures that account for and report on
A)qualitative performance.
B)standard performance.
C)employee performance.
D)financial and nonfinancial performance.
Q3) The equation for economic value added excludes operating income and current liabilities.
A)True
B)False
Q4) Variable costing is utilized to evaluate the performance of A)investment centers.
B)revenue centers.
C)cost centers.
D)profit centers.
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Chapter 22: Standard Costing and Variance Analysis
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Q1) Using the above information provided for Good Sleep,the total variable overhead variance is
A)$4,500 (U).
B)$500 (F).
C)$79,500 (U).
D)$30,000 (F).
Q2) Compute the fixed overhead cost variance.
A)$2,750 (F)
B)$925 (U)
C)$3,675 (U)
D)$5,800 (U)
Q3) Compute the variable overhead efficiency variance.
A)$10,000 (F)
B)$10,000 (U)
C)$40,000 (F)
D)$40,000 (U)
Q4) Predetermined overhead costs are the same as actual costs.
A)True
B)False
Q5) Mention a few reasons for an unfavorable direct labor cost variance.
Page 24
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Chapter 23: Short-Run Decision Analysis
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Q1) Divisional income (or segment margin)for South Division is
A)$(100,000).
B)$(75,000).
C)$(10,000).
D)$125,000.
Q2) Which product provides the greatest amount of incremental revenue from further processing?
A)Wood Cleaner
B)Kitchen Cleaner
C)Both options provide the same incremental revenue.
D)Neither option provides incremental revenue.
Q3) Fixed costs are often irrelevant in make-or-buy decisions.
A)True
B)False
Q4) When faced with a make-or-buy decision,managers need which item of information about making?
A)Variable costs of making the item
B)Need for additional machinery
C)Incremental fixed costs
D)All of these choices
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Chapter 24: Capital Investment Analysis
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Q1) The minimum rate of return is also known as the hurdle rate.
A)True
B)False
Q2) To analyze a capital investment using the accounting rate-of-return method,one can use an estimated amount for the annual net income.
A)True
B)False
Q3) Capital investment analysis is a decision process for the purchase of capital facilities,such as buildings and equipment.
A)True
B)False
Q4) Which of the following is measured by the payback period method?
A)The period for which an investment is expected to be useful
B)The expected cash inflows and outflows of an investment
C)The estimated length of time to recover the cost of an investment
D)The economic life of an investment
Q5) Managers rely strictly on financial information when faced with decisions.
A)True
B)False
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Chapter 25: Pricing Decisions, including Target Costing and Transfer Pricing
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Q1) An internal issue to be considered when setting a price is
A)whether there is a sole source or heavy competition.
B)the life of the product or service.
C)a price geared toward a minimum return on investment.
D)whether there is seasonal demand or continual demand.
Q2) Fixed costs that change for activity outside the relevant range would include A)depreciation.
B)electricity costs.
C)production supplies costs.
D)raw materials costs.
Q3) Explain how target costing differs from traditional cost-based pricing methods.
Q4) Return on assets pricing is based on the estimated number of units to be sold.
A)True
B)False
Q5) Gross margin pricing establishes selling prices at an amount that is a stipulated rate above variable production costs.
A)True
B)False
Q6) What are the four pricing rules managers must follow to stay in business?
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Chapter 26: Quality Management and Measurement
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Q1) The costs of quality are made up of
A)prevention costs and appraisal costs.
B)internal failure costs and external failure costs.
C)costs of conformance and costs of nonconformance.
D)product design and production performance.
Q2) The primary focus of a management information system is on the management of A)people.
B)costs.
C)activities.
D)time.
Q3) Which of the following is a good indicator of management's strong commitment to product quality?
A)Product recalls increased as a percentage of sales
B)Nonconformance costs increased as a percentage of total quality costs
C)Customer service costs reduced by 70 percent over the previous year
D)High costs of conformance to quality
Q4) To become ISO certified,an organization must pass a rigorous third-party audit of its manufacturing and service processes.
A)True
B)False
28
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Chapter 27: Accounting for Unincorporated Businesses
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Q1) When a partner withdraws from a partnership,an audit might be performed and the assets reappraised.
A)True
B)False
Q2) The ability of a partner to enter into a contract on behalf of all partners is called
A)the partnership agreement.
B)voluntary association.
C)mutual agency.
D)unlimited liability.
Q3) Chad invests $20,000 for a one-third interest in a partnership in which the other partners have capital totaling $52,000 before admitting Chad.After distribution of the bonus,what is Chad's capital?
A)$10,666
B)$17,334
C)$20,000
D)$24,000
Q4) There is no income tax imposed on a partnership.
A)True
B)False
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Chapter 28: Accounting for Investments
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Q1) Trading securities appear as current assets on the balance sheet at their historical cost regardless of subsequent increases or decreases in market value.
A)True
B)False
Q2) Most long-term bond investments are classified as held-to-maturity securities.
A)True
B)False
Q3) Unless there is evidence to the contrary,an investor owning 35 percent of the stock of an investee is assumed to have significant influence.
A)True
B)False
Q4) All of the following are indications of significant influence over another company except
A)exchange of managerial personnel.
B)representation on the board of directors.
C)technological dependency between the two companies.
D)ownership of all of the other company's debt securities.
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