Managerial Accounting Chapter Exam Questions
Course Introduction
Managerial Accounting provides students with an in-depth understanding of the role of accounting information in business decision-making. The course focuses on the techniques and concepts used by managers to plan, control, and evaluate organizational operations. Topics include cost behavior, budgeting, performance analysis, variance analysis, and the use of accounting data for strategic planning. Emphasis is placed on real-world applications and case studies to prepare students to interpret and utilize financial information for effective management and organizational success.
Recommended Textbook
Financial Managerial Accounting 16th Edition by Jan Williams
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Page 2
Chapter 1: Accounting: Information for Decision Making
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Q1) Which of the following does not describe accounting?
A) It is commonly referred to as the language of business.
B) It is an end rather than a means to an end.
C) It is useful for decision-making.
D) It is used by businesses, governments, non-profit organizations, and individuals.
Answer: B
Q2) The principal difference between management accounting and financial accounting is that financial accounting information is:
A) Prepared by managers.
B) Intended primarily for use by decision makers outside the business organization.
C) Prepared in accordance with a set of accounting principles developed by the Institute of Certified Management Accountants.
D) Oriented toward measuring solvency rather than profitability.
Answer: B
Q3) The information is historical in nature. It reports the results of events and transactions that have already occurred.
Answer: Financial
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3
Chapter 2: Basic Financial Statements
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Q1) From an accounting viewpoint, when is a business considered an entity separate from its owner(s)?
A) Only when organized as a sole proprietorship.
B) Only when organized as a partnership.
C) Only when organized as a corporation.
D) In each of the above situations, the business is an accounting entity separate from the activities of the owner(s).
Answer: D
Q2) Capital stock represents:
A) The amount invested in the business by stockholders when shares of stock were initially issued by a corporation.
B) The owners' equity for a business organized as a corporation.
C) The owners' equity accumulated through profitable operations that have not been paid out as dividends.
D) The price paid by the current owners to acquire shares of stock in the corporation, regardless of whether they bought the shares directly from the corporation or from another stockholder.
Answer: A
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4
Chapter 3: The Accounting Cycle: Capturing Economic Events
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Q1) Which of the following accounting procedures requires the greatest knowledge of generally accepted accounting principles?
A) Journalizing business transactions.
B) Posting journal entries to ledger accounts.
C) Preparing a trial balance.
D) Locating errors in a trial balance.
Answer: A
Q2) If the trial balance has a smaller debit balance than credit balance, it signifies:
A) Assets are more than liabilities.
B) A profit.
C) A loss.
D) An error has been made.
Answer: D
Q3) On January 5, 2012, total liabilities are:
A) $0.
B) $579,000.
C) $1,399,000.
D) $1,721,000.
Answer: B
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Chapter 4: The Accounting Cycle: Accruals and Deferrals
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Q1) The CPA firm auditing Mason Street Recording Studios found that total stockholders' equity was understated and liabilities were overstated. Which of the following errors could have been the cause?
A) Making the adjusting entry for depreciation expense twice.
B) Failing to record interest accrued on a note payable.
C) Failing to make the adjusting entry to record revenue which had been earned but not yet billed to clients.
D) Failing to record the earned portion of fees received in advance.
Q2) Videobusters, Inc. offered books of video rental coupons to its patrons at $40 per book. Each book contained a certain number of coupons for video rentals. During the current period 500 books were sold for $20,000, and this amount was credited to Unearned Rental Revenue. At the end of the period, it was determined that $15,000 worth of book coupons had been used by customers to rent videos. The appropriate adjusting entry at the end of the period would be:
A) Debit Rental Revenue $5,000 and credit Unearned Rental Revenue $5,000.
B) Debit Rental Revenue $15,000 and credit Unearned Rental Revenue $15,000.
C) Debit Unearned Rental Revenue $5,000 and credit Rental Revenue $5,000.
D) Debit Unearned Rental Revenue $15,000 and credit Rental Revenue $15,000.
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6
Chapter 5: The Accounting Cycle: Reporting Financial Results
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Q1) Assets are considered current assets if they are cash or will usually be converted into cash:
A) Within a month or less.
B) Within 3 months.
C) Within a year or less.
D) Within 6 months or less.
Q2) Interim financial statements:
A) Cover a period less than one year.
B) Cover only periods of a quarter of a year.
C) Cover periods greater than a year.
D) Cannot cover a period of one month or less.
Q3) Which of the following journal entries is required to close the Income Summary account of a profitable company?
A) Debit Income Summary, credit Retained earnings.
B) Credit Income Summary, debit Retained earnings.
C) Debit Income Summary, credit Capital Stock.
D) Credit Income Summary, debit Capital Stock.
Q4) Working capital equals current assets divided by current liabilities.
A)True B)False
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Chapter 6: Merchandising Activities
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Q1) The gross profit margin:
A) Is the dollar amount of gross profit expressed as a percentage of cost of sales.
B) May indicate popular products and successful marketing strategies.
C) Must be computed for the business as a whole rather than for specific sales departments.
D) Is equal to cost of goods sold plus gross operating expenses.
Q2) Which of the following appears in the income statement of a merchandising business, but not in the income statement of a business that renders only services?
A) Interest revenue.
B) Gross profit.
C) Advertising expense.
D) Income tax expense.
Q3) Sales revenue is recognized in the period in which:
A) Merchandise is delivered to the customer.
B) The customer orders the merchandise.
C) Cash payment is received by the seller.
D) Purchases are made to replace the merchandise sold.
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8
Chapter 7: Financial Assets
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Questions
Q1) J. Lennon borrows a sum of money from Y. Ono. A promissory note is used to document the terms of the transaction. In this situation:
A) J. Lennon is considered the maker of the note.
B) J. Lennon is considered the payee of the note.
C) J. Lennon records the note as an asset in his accounting records.
D) The maker of the note could be either Y. Ono or J. Lennon depending on which party actually draws up the document.
Q2) On January 1, Wong Company established a petty cash fund of $300. The journal entry to record the replenishment of the fund for $260 at the end of January includes:
A) A debit to Petty Cash of $260.
B) A credit to Cash of $260.
C) A debit to various expenses of $40.
D) No journal entry; an entry is needed only when the petty cash fund is created or discontinued.
Q3) A compensating balance is often required by a bank as a condition for granting a loan.
A)True
B)False
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Chapter 8: Inventories and the Cost of Goods Sold
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Q1) Assuming that Anderson uses the LIFO flow assumption, it should record this inventory shrinkage by:
A) Debiting Cost of Goods Sold $7,000.
B) Crediting Cost of Goods Sold $7,500.
C) Debiting Cost of Goods Sold $7,500.
D) Crediting Cost of Goods Sold $7,000.
Q2) Assuming that Ace Systems uses the FIFO flow assump?tion, the 12 units of this product in inventory at January 31 have a total cost of:
A) $341
B) $509.
C) $499.
D) Some other amount.
Q3) Overstating the ending inventory will result in understating the cost of goods sold and overstating profits.
A)True
B)False
Q4) The higher a company's inventory turnover rate, the higher its gross profit.
A)True
B)False
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Chapter 9: Plant and Intangible Assets
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Q1) Once the estimated life is determined for a depreciable asset it can never be changed.
A)True
B)False
Q2) Refer to the information above. In the year 2015, Tilton Products sells this machinery for $4,500. At the date of sale, the machinery had been depreciated by Tilton Products to its estimated residual value of $8,000. This sale results in:
A) A $3,500 loss in both the company's financial statements and income tax return.
B) No gain or loss in either the financial statements or income tax return.
C) A $3,500 loss in the financial statements, a $3,500 gain in the income tax return.
D) A $3,500 loss in the financial statements, but no gain or loss in the income tax return.
Q3) Sales tax on equipment is not part of the acquisition cost and should not be capitalized.
A)True
B)False
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Chapter 10: Liabilities
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Q1) Assume Gamma borrows $5 million to finance its expansion. Gamma's debt ratio immediately after the borrowing will be (rounded):
A) .11.
B) .23.
C) .30 (rounded).
D) .35.
Q2) Each of the following must be disclosed in the financial statements, except:
A) The total amounts of long-term debt maturing in each of the next five years.
B) The company's debt ratio and interest coverage ratio for the current year.
C) Loss contingencies, when a reasonable possibility exists that a material loss has been incurred.
D) The fair value of long-term liabilities, when this value is significantly different from the amount shown in the balance sheet.
Q3) On April 1, Year 1, the journal entry to record issuance of the bonds will include:
A) A credit to Interest Payable of $1,000,000.
B) A debit to Cash of $20,000,000.
C) A credit to Bonds Payable of $2,100,000.
D) A debit to Cash of $21,000,000.
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Page 12
Chapter 11: Stockholders Equity: Paid-In Capital
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Q1) The rights of a common stockholder do not include the right:
A) To vote for directors.
B) To withdraw a share of corporate net assets proportionate to the person's stockholdings.
C) To receive a proportionate share of corporate assets upon liquidation, after creditors have been paid.
D) To share in profits when the board of directors declares a dividend.
Q2) Seville Corporation has net assets of $2,072,000 and paid-in capital of $700,000. The only stock issue consists of 74,000 outstanding shares of common stock. From this information, it can be deduced that the company has:
A) Retained earnings of $2,072,000.
B) A deficit of $2,072,000.
C) A book value of $9.46 per share of common stock.
D) A book value of $28 per share of common stock.
Q3) Refer to the information above. Total stockholders' equity is:
A) $2,400,000.
B) $2,460,000.
C) $2,340,000.
D) $2,292,000.
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Page 13
Chapter 12: Income and Changes in Retained Earnings
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Q1) Refer to the information above. What was the average issue price per share of preferred stock?
A) $100.
B) $110.
C) $115.
D) $5.
Q2) The amount of earnings per share is usually computed:
A) For both preferred and common stock.
B) For common stock by deducting the dividends on preferred stock from net income and dividing the remaining amount by the weighted average number of common shares outstanding.
C) By dividing net income by the combined number of preferred and common shares.
D) On the basis of the number of shares outstanding at year-end, regardless of changes in the number of shares during the year.
Q3) A statement of stockholders' equity discloses each of the following except:
A) The market value of the stockholders' equity at the end of the year.
B) The cost of treasury stock owned at the end of the year.
C) Net income for the current year.
D) The amount of cash dividends declared during the current year.
Q4) What was the average issue price per share of preferred stock?
Page 14
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Chapter 13: Statement of Cash Flows
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Q1) All of the following are advantages of an increasing cash flow from operations except:
A) A company is likely to pay its current bills with cash from operations not earnings.
B) A company with cash is in a better position to fund growth.
C) Large cash flows eliminate the need for borrowing.
D) Earnings are viewed better if cash flows from operations closely match net income.
Q2) The 2010 statement of cash flows of Dickens Corporation shows $500,000 cash paid for dividends. If dividends in Dickens' statement of retained earnings are reported at $550,000 then:
A) Dickens' dividends payable account must amount to $50,000 at the end of 2010.
B) Dickens' Cash account must have increased by $50,000 in 2010.
C) Dickens' dividends payable account must have increased by $50,000 in 2010.
D) Dickens' dividends payable account must have decreased by $50,000 in 2010.
Q3) Compute the cash received from customers during the current year.
A) $530,000.
B) $510,000.
C) $520,000.
D) $80,000.
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Chapter 14: Financial Statement Analysis
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Q1) The debt ratio is a measure of:
A) Net cash flows relating to financing activities.
B) Long-term credit risk.
C) Short-term solvency.
D) Profitability, independent of the manner in which assets are financed.
Q2) Noble's gross profit rate was:
A) 18%.
B) 46%.
C) 50%.
D) 54%.
Q3) A comparative financial statement:
A) Places the balance sheet, the income statement, and the statement of cash flows side-by-side in order to compare the results.
B) Places two or more years of a financial statement side-by-side in order to compare results.
C) Places the financial statements of two or more companies side-by-side in order to compare results.
D) Places the dollar amounts next to the percentage amounts of a given year for the income statement.
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Page 16
Chapter 15: Global Business and Accounting
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Q1) Samson Corporation buys a foreign currency future contract as a hedging strategy to protect against possible losses from fluctuations in a particular foreign exchange. This strategy suggests that Samson Corporation has:
A) Foreign accounts payable and expects the exchange rate to fall.
B) Foreign accounts receivable and expects the exchange rate to rise.
C) Foreign accounts payable and expects the exchange rate to rise.
D) Foreign accounts receivable and expects the exchange rate to fall.
Q2) Which of the following businesses or individuals would benefit most from a strong U.S. dollar?
A) A small store that sells American-made cameras in St. Louis, Missouri. The store has no foreign receivables or payables.
B) The Cancun, Mexico, outlet for Levi's jeans (made in the U.S.)
C) International Harvester (an American manufacturer of farming machinery that sells equipment to foreign customers.)
D) An American tourist visiting France.
Q3) Accounting as a profession did not exist in England prior to 1988.
A)True
B)False
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17
Chapter 16: Management Accounting: a Business Partner
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Q1) The placing of direct materials into the production process is recorded by an entry crediting:
A) Materials Expense.
B) Raw Materials Inventory.
C) Work in Process Inventory.
D) Finished Goods Inventory.
Q2) The total amount of inventory that should appear in the company's balance sheet at April 30 is:
A) $39,000.
B) $82,000.
C) $73,000.
D) $78,000
Q3) Which of the following is not one of the three types of inventories of a manufacturing company?
A) Raw materials inventory.
B) Work in process inventory.
C) Product inventory.
D) Finished goods inventory.
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18
Chapter 17: Job Order Cost Systems and Overhead
Allocations
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Q1) What is the finished goods inventory at October 31? $___________
Q2) The account Work-in-Process Inventory:
A) Consists of completed goods that have not yet been sold.
B) Consists of goods being manufactured that are incomplete.
C) Consists of materials to be used in the production process.
D) Consists of the cost of new materials used, labor but not overhead.
Q3) An activity-based costing system cannot help managers make better product pricing decisions.
A)True
B)False
Q4) An effective cost accounting system should match processes with the _____ used in order to maintain competitive advantage. Select the best answer to complete the sentence.
A) sales
B) shareholders
C) resources
D) disbursements
Q5) Under- and over-applied overhead
Page 19
What is meant by under-applied overhead? By over-applied overhead? Briefly explain each term.
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Chapter 18: Process Costing
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Q1) In a production cost report, the units in beginning Work in Process are always expressed as equivalent units.
A)True
B)False
Q2) Equivalent full units of production represent units of:
A) Finished goods inventory.
B) Units of work-in-process inventory.
C) Work performed during the period.
D) Sales generated during the period.
Q3) For the month of July, the number of equivalent units of direct materials produced was:
A) 700.
B) 800.
C) 900.
D) 950.
Q4) United Construction Company, which manufactures residential buildings, would most likely use a process costing system.
A)True
B)False
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Chapter 19: Costing and the Value Chain
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Q1) What are the total external failure costs for the Abrams Corporation?
A) $38,300.
B) $34,500.
C) $19,700.
D) $35,250.
Q2) To arrive at a target cost, the target selling price and a satisfactory profit margin are added together.
A)True
B)False
Q3) Activity-based costing systems refer to acquiring materials and manufacturing goods only as needed to fill customers' orders.
A)True
B)False
Q4) Just-in-time costing considers all potential resources used by the product over its entire life.
A)True
B)False
Q5) The length of time for a product to pass completely through a specific manufacturing process. ________________________________
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Chapter 20: Cost-Volume-Profit Analysis
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Q1) What will be Sultan 's monthly operating income if 3,700 units are sold each month?
A) $15,000.
B) $31,000.
C) $75,000.
D) $105,000.
Q2) Variable costs are usually transformed into fixed costs when a business operates at less than full capacity.
A)True
B)False
Q3) At the current selling price of $70 per unit, the dollar volume of sales per month necessary for Accents to break-even is:
A) $12,000.
B) $20,000.
C) $30,000.
D) Some other amount.
Q4) Assume Rhinefold's margin of safety was $300,000 in May. What was the company's operating income in May? $__________.
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22
Chapter 21: Incremental Analysis
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Q1) Joint costs allocated to product EB total: $_____________
Q2) An opportunity cost is a relevant cost when making a business decision. A)True
B)False
Q3) Opportunity costs represent:
A) Cash expenditures for business opportunities.
B) Benefits foregone.
C) Costs avoided by making a particular decision.
D) Indirect costs typically classified as manufacturing overhead.
Q4) Mell Co. manufactured 100 personal computers at a cost of $30,000. It can sell them as is for $65,000, or install hard disks in them and sell them for $105,000. The $30,000 original manufacturing cost is:
A) An out-of-pocket cost because it has already been paid.
B) A sunk cost because it is not relevant to the decision.
C) An incremental cost because it is relevant to the decision.
D) A fixed cost because it will remain the same no matter which action is taken.
Q5) Pricing special orders
Explain why an American corporation might sell a product in Eastern Europe at a price significantly below that for which it sells the same product in the United States.
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Chapter 22: Responsibility Accounting and Transfer Pricing
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Q1) Disneyland charges visitors for admission to the park but not for individual rides or attractions. "Splash Mountain" is one of the rides in Disneyland. The Walt Disney Company should evaluate "Splash Mountain" as:
A) A revenue center.
B) A cost center.
C) An investment center.
D) A profit center (other than an investment center).
Q2) The cost of heating and air conditioning the store should be:
A) Allocated among the sales departments based upon relative sales volume.
B) Allocated among the sales departments based upon their relative floor space.
C) Classified as a common fixed cost.
D) Omitted from the segmented income statements.
Q3) The concept of contribution margin applies:
A) Only to investment centers.
B) Only to profit centers.
C) Only to cost centers.
D) To all types of responsibility centers.
Q4) The responsibility margin is the contribution margin less common fixed costs.
A)True
B)False
Page 24
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Chapter 23: Operational Budgeting
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Q1) The Company's actual manufacturing costs for the month of May totaled $144,000, while the budgeted manufacturing costs were $162,000. Comparison of the budgeted costs with actual amounts:
A) Is not significant unless the budgeted and actual figures are based upon the same level of production.
B) Demonstrates that the Manufacturing Department operated very efficiently during May.
C) Indicates that production cost per unit was 10% below budgeted cost per unit.
D) Indicates that the Company produced only 90% of the number of units budgeted for production in May.
Q2) A master budget actually includes a number of related budgets. A)True
B)False
Q3) Hayden Corporation budgeted its cost of finished goods manufactured at $500,000 for May. Its May 31 finished goods inventory budgeted to be twice the level of its May 1 finished goods inventory. The cost of goods sold budget for May has been set at $450,000.
Hayden's finished goods inventory at May 31 is budgeted at: $_____________
Q4) Discuss the benefits that a company may derive from a formal budgeting process.
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Chapter 24: Standard Cost Systems
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Q1) The overhead spending variance:
A) Occurs automatically whenever actual production levels differ from the "normal" production level used to compute the standard overhead cost per unit.
B) Is the difference between amounts spent for actual manufacturing overhead costs and the amount applied to production.
C) Is computed as the difference between variable overhead per the flexible budget and actual variable overhead costs incurred.
D) Is the portion of the total overhead variance that is considered "controllable" by the production manager.
Q2) It is possible for the overhead volume variance to be favorable and the overhead spending variance to be unfavorable.
A)True
B)False
Q3) A spending variance results from incurring more overhead costs than allowed for the actual level of activity achieved.
A)True
B)False
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Chapter 25: Rewarding Business Performance
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Q1) Identify the criticisms of using ROI (Return on investment) as the only performance measure.
Q2) Calculate the residual income assuming the following information:
A) $156,000.
B) $108,000.
C) $219,000.
D) $45,000.
Q3) What is the return on investment for Mahen, Inc?
A) 5%.
B) 6%.
C) 10%.
D) 20%.
Q4) State the four performance lenses in a balanced scorecard and state at least two measures for each of them.
Q5) The balanced scorecard approach attempts to measure whether an organization is meeting its strategic goals.
A)True
B)False
Q6) Calculate and explain residual income and economic value added.
Q7) Explain the importance of incentive systems for motivating performance.
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Chapter 26: Capital Budgeting
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Q1) The net present value of an investment proposal is the difference between the total present value of future net cash flows and the cost of the investment.
A)True B)False
Q2) When straight-line depreciation is used, the average carrying value of an asset with no salvage value is equal to the asset's original cost divided by its estimated useful life.
A)True B)False
Q3) Which of the following is not considered when using the payback period to evaluate an investment?
A) The profitability of the investment over its entire life.
B) The annual net cash flow of the investment.
C) The cost of the investment.
D) The expected life of the investment.
Q4) Capital budgeting estimates often involve a considerable degree of uncertainty. A)True B)False
Q5) Annual net cash flow: $_____________
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Chapter 28: Forms of Business Organization
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Q1) Sally Smythe enters into a partnership by contributing the following: Cash $15,000; Accounts Receivable $4,500; Machinery which cost $3,000 and has a fair market value of $2,125; and accounts payable of $1,200. What amount will be recorded in her capital account?
A) $21,625.
B) $20,425.
C) $22,500.
D) $21,300.
Q2) Which of the following is a characteristic of a corporation?
A) Declaration of a dividend by the stockholders.
B) Appointment of officers by the stockholders.
C) Transferability of shares of stock.
D) Unlimited liability.
Q3) When evaluating the liquidity of a partnership, creditors will likely base their decision on:
A) the business ability to generate a profit.
B) previous debts of the business.
C) the total assets owned by the business.
D) the financial strength of the owners.
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Chapter 27: The Time Value of Money: Future Amounts and
Present Values Answer Key
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49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/78576
Sample Questions
Q1) The rate of interest is usually expressed as an annual rate.
A)True
B)False
Q2) Future value is the amount that must be invested today at a specific interest rate to receive a particular amount at some future date.
A)True
B)False
Q3) Financial instruments do not include:
A) Contracts that call for receipts or payment of cash.
B) Equity investment in another business.
C) Cash.
D) Tangible assets.
Q4) The obligation for deferred income taxes is the only long-term liability that is not reported at its present value.
A)True
B)False
Q5) Explain how compound interest applies to the time value of money.
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Q6) Explain what is meant by the "time value of money." Provide examples.
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