Managerial Accounting (introductory level)
Exam Bank
Course Introduction
Managerial Accounting (introductory level) provides students with a foundational understanding of how accounting information is used by managers to plan, control, and make decisions within an organization. The course covers essential topics such as cost behavior, cost-volume-profit analysis, budgeting, performance evaluation, and various costing systems. Emphasis is placed on interpreting and applying accounting data to real-world business scenarios, enabling students to develop analytical skills and make informed decisions to drive organizational success. This course is ideal for those seeking to understand the internal uses of accounting information and its impact on strategic management.
Recommended Textbook
Financial Accounting 9th Edition by Walter T. Harrison
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13 Chapters
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Chapter 1: The Financial Statements
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Sample Questions
Q1) The income statement is also called the Statement of financial position.
A)True
B)False
Answer: False
Q2) Stockholders' equity consists of:
A) additional paid-in capital, which is equal to the par value of the stock.
B) treasury stock, which represents stock of another corporation that the company has purchased.
C) accumulated other comprehensive income, which represents items of gain or loss that bypass the income statement.
D) common stock, which is recorded at its market value.
Answer: C
Q3) The accounting process begins and ends with people making decisions.
A)True
B)False
Answer: True
Q4) Elements are the building blocks of the financial statements.
A)True
B)False
Answer: True
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Chapter 2: Transaction Analysis
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Sample Questions
Q1) The total debits to an account must equal the total credits to the account.
A)True
B)False
Answer: False
Q2) A journal entry that debits Cash and credits Accounts Receivable indicates that:
A) payment was received on account.
B) payment was made on account.
C) revenue increased.
D) revenue decreased.
Answer: A
Q3) Which error will be uncovered by a trial balance?
A) The bookkeeper recorded the same journal entry three times.
B) The bookkeeper forgot to record a journal entry for a large amount.
C) The bookkeeper recorded both the debit and credit of a journal entry as $200 instead of $700.
D) The bookkeeper recorded a journal entry with a debit of $400 and a credit of $930.
Answer: D
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Chapter 3: Accrual Accounting Income
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Sample Questions
Q1) On December 31, 2012, salaries owed to employees total $4,150. These will be paid on January 4, 2013. An adjusted trial balance prepared on December 31, 2012, includes which of the following?
A) Salaries Expense, $4,150
B) Salaries Payable, $4,150
C) Unearned Salaries, $4,150
D) Unearned Salaries, $4,150 and Salaries Payable, $4,150
Answer: B
Q2) With an accrual:
A) the cash is received after the revenue is recorded.
B) the cash is paid before the expense is recorded.
C) plant assets can create an accrual adjustment.
D) prepaid expenses can create an accrual adjustment.
Answer: A
Q3) When an adjustment is made for prepaid rent:
A) an asset increases and an expense decreases.
B) one asset increases and another decreases.
C) an asset decreases and an expense increases.
D) a liability decreases and an expense decreases.
Answer: C
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Chapter 4: Internal Control Cash
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Sample Questions
Q1) In a bank reconciliation, a NSF check is:
A) added to the bank balance.
B) added to the book balance.
C) deducted from the book balance.
D) deducted from the bank balance.
Q2) Several large frauds occurred in 2001 and 2002. Which of the following was NOT a consequence of these frauds?
A) Arthur Anderson, LLP was convicted of fraud but was allowed to stay in business.
B) There were adverse market reactions throughout the world.
C) Thousands of jobs were lost when Enron and WorldCom went out of business.
D) There was a loss of confidence in the financial reporting system.
Q3) Hints of where fraud, mistakes or financial harm can occur in a company is called:
A) the control environment.
B) risk assessment.
C) control procedures.
D) the tone at the top.
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Chapter 5: Short-Term Investments Receivables
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Sample Questions
Q1) Using the percentage-of-sales method, you estimate that total uncollectible accounts is $5,875. The Allowance for Uncollectible Accounts prior to adjustment has a credit balance of $2,635. The amount of the adjusting entry for uncollectible accounts expense is:
A) $2,635.
B) $3,240.
C) $5,875.
D) $8,510.
Q2) One method of establishing proper internal control over the collection of accounts receivable is to:
A) set up a petty cash fund.
B) make all disbursements by cash.
C) establish a bank lock box.
D) designate an authorized check signer.
Q3) The entry to write off an account under the allowance method for estimating uncollectible accounts:
A) reduces total assets.
B) reduces net income.
C) has no effect on total assets or net income.
D) increases net income.
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Chapter 6: Inventory Cost of Goods Sold
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Sample Questions
Q1) The financial statements of a merchandising company will show:
A) the same accounts as the financial statements of a service company.
B) gross profit after net income on the income statement.
C) inventory as a current asset on the balance sheet.
D) cost of goods sold as an operating expense on the income statement.
Q2) When prices are rising, a company using the FIFO costing method will generally pay less taxes than if the company had been using the LIFO method.
A)True
B)False
Q3) ABC, Inc. began the year with $250,000 of inventory and purchased $1,500,000 of goods during the year. Sales for the year were $2,750,000 and the gross profit percentage is 45%. Compute the company's estimated cost of ending inventory by using the gross profit method. How can this estimate be checked for accuracy?
Q4) Under the perpetual inventory system, inventory shifts from an asset to an expense when the seller delivers the goods to the buyer.
A)True
B)False
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Chapter 7: Plant Assets, Natural Resources, Intangibles
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Sample Questions
Q1) Which of the following intangible assets has an indefinite life?
A) Patents
B) Copyrights
C) Research and development
D) Goodwill
Q2) Jackson Corporation acquired equipment on January 1, 2010, for $320,000. The equipment had an estimated useful life of 10 years and an estimated salvage value of $25,000. On January 1, 2013, Jackson Corporation revised the total useful life of the equipment to 6 years and the estimated salvage value to be $20,000. Using the straight-line method of depreciation, what is the book value as of December 31, 2013?
A) $146,000
B) $154,333
C) $159,000
D) $161,000
Q3) The only plant asset that does not depreciate is:
A) office supplies.
B) furniture.
C) land.
D) patents.
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Page 9
Chapter 8: Long-Term Investments the Time Value of Money
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Sample Questions
Q1) Bonds of publicly traded companies are traded similarly to stocks.
A)True
B)False
Q2) Perdue Company had the following transactions pertaining to stock investments:February 1, Purchased 3,000 shares of Hudson Company (10% ownership) at the market price of $17 per share.
- June 1, Received cash dividends of $6,000 on Hudson Company stock.
- October 1, Sold 3,000 shares of Hudson stock for $54,000. The entry to record the sale of the stock would include a:
A) debit to Long-Term Investment for $51,000.
B) credit to Long-Term Investment for $51,000.
C) debit to Gain on Sale of Investment $3,000.
D) debit to Loss on Sale of Investment $3,000.
Q3) Sales of available-for-sale investments are reported as investing activities on the Consolidated Statement of Cash Flows.
A)True
B)False
Q4) The principal is the amount borrowed or invested.
A)True
B)False
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Chapter 9: Liabilities
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Sample Questions
Q1) If bonds are issued at a premium, the carrying value of the bonds will be greater than the face value of the bonds for all periods prior to the bond maturity date.
A)True
B)False
Q2) A disadvantage of using bonds as a method of long-term financing is that:
A) interest must be paid regardless of earnings.
B) interest expense is tax deductible.
C) bond holders do not have voting rights.
D) issuing bonds results in higher earnings per share.
Q3) The current portion of long-term debt should:
A) be reclassified as a current liability.
B) be paid immediately.
C) be classified as a long-term liability.
D) not be separated from the long-term debt.
Q4) The account Discount on Bonds Payable increases a company's liabilities.
A)True
B)False
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11
Chapter 10: Stockholders Equity
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Sample Questions
Q1) The date when a cash dividend becomes a legal obligation is on the:
A) date of record.
B) declaration date.
C) last day of the corporate year.
D) payment date.
Q2) Dividends may be declared and paid in cash only.
A)True
B)False
Q3) The authority to declare a dividend lies with the:
A) CFO.
B) shareholders.
C) SEC.
D) Board of Directors.
Q4) The chairperson of the board of directors has the title of:
A) Chief Financial Officer (CFO).
B) President.
C) Chief Executive Officer (CEO).
D) Chief Operating Officer (COO).
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Page 12
Chapter
Statement, the Statement of Comprehensive Income, the Statement of Stockholders Equity
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Sample Questions
Q1) The purpose of channel stuffing is to increase operating expenses.
A)True
B)False
Q2) A type of financial statement fraud that is accomplished by shipping more to customers than they ordered, with the expectation that they may return some or all of the items is called:
A) improper shipping recognition.
B) improper sales recognition.
C) channel stuffing.
D) accidental shipping.
Q3) The independent auditors' report is addressed to:
A) management.
B) board of directors only.
C) stockholders only.
D) board of directors and stockholders.
Q4) Which of the following statements is true?
A) The income tax return is prepared using GAAP.
B) The income tax return is prepared using rules set by the SEC.
C) The income tax return is prepared using rules set by the IRS.
D) The income tax return and the financial statements are the same documents. Page 13
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Page 14
Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) The statement of cash flows classifies cash receipts and payments as operating, nonoperating, and financial activities.
A)True
B)False
Q2) Under the indirect method of preparing a statement of cash flows, amortization expense for the current period is:
A) added in the investing activities section.
B) subtracted in the investing activities section.
C) added in the financing activities section.
D) added in the operating activities section.
Q3) In computing net cash provided by operating activities, each of the following is added to net income EXCCEPT:
A) an increase in accrued expenses payable.
B) a gain on sale of equipment.
C) depreciation expense.
D) a decrease in inventory.
Q4) The statement of cash flows shows the relationship of assets to cash flows.
A)True
B)False
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) On a statement of cash flows of a struggling company, net income would ordinarily be:
A) less than depreciation expense.
B) more than depreciation expense.
C) greater than cash provided by operating activities.
D) more than cash provided by operating activities.
Q2) Horizontal analysis of financial statements is an:
A) analysis tool.
B) analysis theory
C) analysis principle.
D) analysis requirement.
Q3) Benchmarking financial statements represents a form of:
A) horizontal analysis.
B) vertical analysis.
C) gross profit analysis.
D) trend analysis.
Q4) Horizontal analysis and trend analysis are synonymous.
A)True
B)False
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