Managerial Accounting
Chapter Exam Questions
Course Introduction
Managerial Accounting focuses on the concepts, methods, and applications of accounting information for internal decision-making within organizations. The course covers topics such as cost behavior, budgeting, performance evaluation, and various costing methods (job-order, process, and activity-based). Students learn how to analyze and interpret financial information, prepare managerial reports, and use this data for planning, controlling operations, and strategic decision-making. Emphasis is placed on real-world scenarios to develop skills necessary for effective management and leadership in a business environment.
Recommended Textbook
Financial Accounting Information for Decisions 6th Edition by John Wild
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Page 2
Chapter 1: Introducing Accounting in Business
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Sample Questions
Q1) Planning activities:
A)Are the means organizations must use to pay for resources
B)Involve the acquiring and disposing of resources that an organization uses to acquire and sell its products or services
C)Involve defining the ideas,goals and actions of an organization
D)Are the carrying out of an organization's plans
E)Involve using resources to research,develop,purchase,produce and market products and services
Answer: C
Q2) If equity is $300,000 and liabilities are $192,000,then assets equal:
A)$108,000
B)$192,000
C)$300,000
D)$492,000
E)$792,000
Answer: D
Q3) Expenses decrease retained earnings and are the costs acquired to earn revenues.
A)True
B)False
Answer: True
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Chapter 2: Analyzing and Recording Transactions
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Sample Questions
Q1) Explain the difference between a ledger and a chart of accounts.
Answer: A ledger is a record containing all of the accounts of a business and their balances.The chart of accounts is a list of all of the accounts in the ledger that includes an identification number for the accounts.
Q2) A journal gives a complete record of each transaction in one place and shows the debits and credits for each transaction.
A)True
B)False
Answer: True
Q3) A $72,000 receipt of cash from a customer paying on their account was recorded as a $72,000 debit to Accounts Receivable.Assuming this journal entry was posted,what correcting entry (if any)is needed?
A)Debit Cash and Credit Accounts Receivable for $72,000 each
B)Debit Cash and Credit Accounts Receivable for $144,000 each
C)Credit Cash and Debit Accounts Receivable for $72,000 each
D)Credit Cash and Debit Accounts Receivable for $144,000 each
E)No correcting entry is needed for this transaction
Answer: B
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4
Chapter 3: Adjusting Accounts and Preparing Financial Statements
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Sample Questions
Q1) The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from)the retained earnings account is the:
A)Income Summary account
B)Closing account
C)Balance column account
D)Contra account
E)Nominal account
Answer: A
Q2) Expenses incurred but unpaid that are recorded during the adjusting process with a debit to an expense and a credit to a liability are:
A)Intangible expenses
B)Prepaid expenses
C)Unearned expenses
D)Net expenses
E)Accrued expenses
Answer: E
Q3) Profit margin = ___________________ divided by net sales. Answer: Net income
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Chapter 4: Reporting and Analyzing Merchandising Operations
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Sample Questions
Q1) A company has sales of $1,500,000,sales discounts of $102,000,sales returns and allowances of $123,000,shipping charges of $15,000,sales commissions of $34,000,net income totaled $263,500,and cost of goods sold of $420,000.What is the gross profit/margin for the period?
A)$ 806,000
B)$1,031,000
C)$1,182,000
D)$1,080,000
E)$ 855,000
Q2) Sales returns:
A)Refer to merchandise that customers return to the seller after the sale
B)Refer to reductions in the selling price of merchandise sold to customers
C)Represent cash discounts
D)Represent trade discounts
E)Are not recorded under the perpetual inventory system until the end of each accounting period
Q3) Beginning inventory plus the net cost of purchases is the _____________________.
Q4) ______________________ are non-operating activities that include interest expense,losses from asset disposals and casualty losses.
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Chapter 5: Reporting and Analyzing Inventories
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Sample Questions
Q1) In the retail inventory method of inventory valuation,the retail amount of inventory refers to the dollar amount measured by looking at the selling prices of inventory items.
A)True
B)False
Q2) Not many companies take a physical count of inventory each year as they rely primarily on inventory records alone to determine the inventory value.
A)True B)False
Q3) The understatement of the beginning inventory balance causes:
A)Cost of goods sold to be understated and net income to be understated
B)Cost of goods sold to be understated and net income to be overstated
C)Cost of goods sold to be overstated and net income to be overstated
D)Cost of goods sold to be overstated and net income to be understated
E)Cost of goods sold to be overstated and net income to be correct
Q4) Goods in transit are automatically included in a company's inventory account. A)True B)False
Q5) What costs are assigned to merchandise inventory?
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Chapter 6: Reporting and Analyzing Cash and Internal Controls
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Sample Questions
Q1) What are the checks that must be completed prior to the completion of invoice approval and voucher preparation?
Q2) ________________________ refers to a company's ability to pay for its short-term obligations.
Q3) A company established a petty cash fund of $100 on September 1.On September 10,the petty cash fund was replenished when there was $16 remaining and there were petty cash receipts for: office supplies,$27; courier,$32; and postage,$22.On September 15,the petty cash fund was increased to $125 in total.Record the above transactions in general journal form.
Q4) Cash equivalents:
A)Include savings accounts
B)Include checking accounts
C)Are short-term investments sufficiently close to their maturity date that their value is not sensitive to interest rate changes
D)Include time deposits
E)Have no immediate value
Q5) The _________________ account is used to record the effects of cash overages and shortages from errors in making change.
Page 8
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Chapter 7: Reporting and Analyzing Receivables
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Q1) When the maker of a note is unable or refuses to pay at maturity,the note is said to be ___________________.
Q2) Failure by a promissory note's maker to pay the amount due at maturity is known as:
A)Protesting a note
B)Closing a note
C)Dishonoring a note
D)Discounting a note
E)Depreciating a note
Q3) ____________________ is the charge for using (not paying)money until a later date.
Q4) During a given year,Compaq had net sales of $32,000 million and average account receivables were $6,850 million.Its accounts receivable turnover is equal to 0.21.
A)True
B)False
Q5) The _________________________ method uses income statement relationships to estimate bad debts and is based on the idea that a given percent of a company's credit sales for a period are uncollectible.
Q6) The person to whom a note is payable to is known as the ______________.
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Chapter 8: Reporting and Analyzing Long-Term Assets
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Sample Questions
Q1) Once the estimated depreciation expense for an asset is calculated:
A)It cannot be changed due to the historical cost principle
B)It may be revised based on new information
C)Any changes are accumulated and recognized when the asset is sold
D)The estimate itself cannot be changed; however,new information should be disclosed in financial statement footnotes
E)It cannot be changed due to the consistency principle
Q2) A company used straight-line depreciation for an item of equipment that cost $12,000,had a salvage value of $2,000 and had a five-year useful life.After depreciating the asset for three complete years,the salvage value was reduced to $1,200 and its total useful life was increased from 5 years to 6 years.Determine the amount of depreciation to be charged against the machine during each of the remaining years of its useful life:
A)$1,000
B)$1,800
C)$1,467
D)$1,600
E)$2,160
Q3) The formula for calculating total asset turnover is _______________________________________.
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Page 10
Chapter 9: Reporting and Analyzing Current Liabilities
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Sample Questions
Q1) Unearned revenue is another name for sales.
A)True
B)False
Q2) Payroll taxes are considered to be contingent liabilities.
A)True
B)False
Q3) A contingent liability:
A)Is always of a specific amount
B)Is a potential obligation that depends on a future event arising out of a past transaction or event
C)Is an obligation not requiring future payment
D)Is an obligation arising from the purchase of goods or services on credit
E)Is an obligation arising from a future event
Q4) A company borrowed $60,000 on a 60-day,10% note payable from its bank.Compute the total cash payment at the note's maturity.
Q5) A single liability can be divided between current and noncurrent liabilities.
A)True B)False
Q6) Identify the types of payroll records prepared for each pay period and each employee.
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Chapter 10: Reporting and Analyzing Long-Term Liabilities
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Sample Questions
Q1) The contract between the bond issuer and the bondholders,which identifies the rights and obligations of the parties is called a(n):
A)Debenture
B)Bond indenture
C)Mortgage
D)Installment note
E)Mortgage contract
Q2) A company purchased equipment and signed a 7-year installment loan at 9% annual interest.The annual payments equal $9,000.The present value factor for an annuity for 7 years at 9% is 5.0330.The present value of the loan is:
A)$9,000
B)$5,033
C)$63,000
D)$57,330
E)$45,297
Q3) The _______________ amortization method allocates bond interest expense over the life of the bonds in a way that yields a constant rate of interest.
Q4) An _______________ is a series of equal payments at equal time intervals.
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Page 12
Chapter 11: Reporting and Analyzing Equity
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Sample
Questions
Q1) A company's stock is selling for $67.20 per share and its earnings per share is $3.50 for the current year.Calculate the price-earnings ratio.
Q2) Dividend yield is the percent of cash dividends paid to common shareholders relative to the:
A)Common stock's market value
B)Earnings per share
C)Investors' purchase price of the stock
D)Amount of retained earnings
E)Amount of cash
Q3) The right of common shareholders to protect their proportionate interest in a corporation by having the first opportunity to buy additional proportionate shares of common stock issued by the corporation is called a:
A)Preemptive right
B)Proxy right
C)Right to call
D)Financial leverage
E)Voting right
Q4) ________________________ is the number of shares that a corporation's charter allows it to sell.
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Chapter 12: Reporting and Analyzing Cash Flows
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Sample Questions
Q1) The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts,such as receipts from customers and subtracts the major items of operating cash disbursements,such as cash paid for merchandise is referred to as the:
A)Direct method of reporting net cash provided or used by operating activities
B)Cash basis of accounting
C)Classified statement of cash flows
D)Indirect method of reporting net cash provided or used by operating activities
E)Net method of reporting cash flows from operating activities
Q2) Explain how to determine cash flows from investing and financing activities.
Q3) Managers only use the cash flow statement to evaluate the net cash increase or decrease and do not pay much attention to the details of cash flows from operating activities,cash flows from investing activities and cash flows from financing activities.
A)True
B)False
Q4) The cash flow on total assets ratio is computed by dividing _____________ by
Q5) What are the five usual steps involved in the preparation of the statement of cash flows?
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Chapter 13: Analyzing and Interpreting Financial Statements
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Sample Questions
Q1) The three most common tools of financial analysis are:
A)Financial reporting,ratio analysis,vertical analysis
B)Ratio analysis,horizontal analysis,financial reporting
C)Horizontal analysis,vertical analysis,ratio analysis
D)Trend analysis,financial reporting,ratio analysis
E)Vertical analysis,political analysis,horizontal analysis
Q2) Describe the purpose of vertical financial statement analysis and how it is applied.
Q3) Market prospects are the ability to provide financial rewards sufficient to attract and retain financing.
A)True
B)False
Q4) Ratios analysis eliminates all of the differences of GAAP versus IFRS financial reporting.
A)True
B)False
Q5) What are the standards for financial analysis comparison? Give examples of each.
Q6) A company has a current ratio of 3.4,total liabilities of $350,240,and long-term notes payable of $120,000.What is the total of current assets for the company?
Page 15
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Chapter 14: Investments and International Operations
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Sample Questions
Q1) Unrealized gains and losses on trading securities are reported as part of net income.
A)True
B)False
Q2) Morgan Company purchased 2,000 shares of Asta's common stock for $143,000 as a long-term investment and is considered available-for-sale.The par value of the stock was $1 per share.Morgan paid $375 in commissions on the transaction.The entry to record the transaction would include a:
A)Credit to Common Stock for $2,000
B)Credit to Common Stock for $143,000
C)Credit to Common Stock for $143,375
D)Debit to Long-Term Investments for $143,000
E)Debit to Long-Term Investments for $143,375
Q3) Profit margin is calculated by sales divided by net income. A)True
B)False
Q4) A company reported net income of $275,000,net sales of $2,500,000 and average total assets of $2,100,000 for the current year.Calculate this company's profit margin,total asset turnover and return on total assets.
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Chapter 15: Reporting and Analyzing Partnerships
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Sample Questions
Q1) Rodriguez,Sate and Melton are dissolving their partnership.Their partnership agreement allocates income and losses equally among the partners.The current period's ending capital account balances are Rodriguez,$32,000,Sate,$28,000,Melton,$(4,000).After all the assets are sold and liabilities are paid,but before any contributions are considered to cover any deficiencies,there is $56,000 in cash to be distributed.Melton pays $2,000 to cover the deficiency in her account.The final distribution of cash would be as follows:
A)Rodriquez $30,000 and State $26,000.
B)Rodriquez $32,000 and State $26,000.
C)Rodriquez $30,000 and State $28,000.
D)Rodriquez $30,000 and State $27,000.
E)Rodriquez $31,000 and State $27,000.
Q2) What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.
Q3) Partner return on equity can be used by each partner to help decide whether additional investment or withdrawal of resources is best for that partner.
A)True
B)False
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Chapter 16: Reporting and Preparing Special Journals
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Sample Questions
Q1) The __________________ principle requires that the benefits from an activity in an accounting information system outweigh the costs of that activity.
Q2) Effective accounting information systems will do all of the following except:
A)Collect and process data from transactions and events
B)Organize data in useful forms
C)Communicate information to business decision makers
D)Are crucial to effective decision-making
E)Eliminate all errors.
Q3) Most companies use batch processing instead of online because batch processing requires continual updating of databases.
A)True
B)False
Q4) Discuss how technology based information systems affect accounting.
Q5) Source documents:
A)Are input devices
B)Provide the basic information processed by an accounting system
C)Cannot be electronic files
D)Store processed information for future use
E)Provide systems that interpret,transform and summarize data
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