Managerial Accounting (overview)
Chapter Exam Questions
Course Introduction
Managerial Accounting provides students with an introduction to the principles and practices used by managers to make informed business decisions. The course covers fundamental topics such as cost behavior, budgeting, performance evaluation, and decision-making processes. Emphasis is placed on the methods used to collect, analyze, and communicate accounting information that assists in planning, controlling operations, and improving organizational effectiveness. Through case studies and practical examples, students learn how accounting data can be applied to solve managerial problems, optimize resources, and achieve strategic goals in various business environments.
Recommended Textbook
Financial Accounting 15th Edition by Carl Warren
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Page 2
Chapter 1: Introduction to Accounting and Business
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Q1) A business is an organization in which basic resources or inputs,such as materials and labor,are assembled and processed to provide outputs in the form of goods or services to customers.
A)True
B)False
Answer: True
Q2) Which of the following is<b> <u>not </b></u>a business transaction?
A)Erin deposits $15,000 in a bank account in the name of Erin's Lawn Service.
B)Erin provided services to customers earning fees of $600.
C)Erin purchased hedge trimmers for her lawn service agreeing to pay the supplier next month.
D)Erin pays her monthly personal credit card bill.
Answer: D
Q3) Net income and net profit do not mean the same thing.
A)True
B)False
Answer: False
Q4) What are the three sections of the statement of cash flows?
Answer: operating activities,investing activities,and financing activities
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Chapter 2: Analyzing Transactions
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Sample Questions
Q1) The trial balance is out of balance and the accountant suspects that a transposition or slide error has occurred.What will the accountant do to confirm this suspicion?
A)Determine the amount of the error and look for that amount on the trial balance.
B)Determine the amount of the error and divide by 2, then look for that amount on the trial balance.
C)Determine the amount of the error and refer to the journal entries for that amount.
D)Determine the amount of the error and divide by 9. If the result is evenly divided, then this type of error is likely.
Answer: D
Q2) The normal balance of the drawing account is a debit.
A)True
B)False
Answer: True
Q3) Transactions are listed in the journal chronologically.
A)True
B)False
Answer: True
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4
Chapter 3: The Adjusting Process
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Sample Questions
Q1) Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned.
A)True
B)False
Answer: True
Q2) The revenue recognition principle
A)is not in conflict with the cash method of accounting
B)determines when revenue is credited to a revenue account
C)states that revenue is not recorded until the cash is received
D)controls all revenue reporting for the cash basis of accounting
Answer: B
Q3) Which of the accounts below would most likely appear on an adjusted trial balance but probably would not appear on the unadjusted trial balance?
A)Fees Earned
B)Accounts Receivable
C)Unearned Fees
D)Depreciation Expense
Answer: D
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Reversing entries are recorded after adjusting entries have been recorded and before closing entries are recorded for the same period.
A)True
B)False
Q2) The drawing account is debited in the closing entry.
A)True
B)False
Q3) Use the end-of-period spreadsheet for Finley Company.The entry to close C.Finley,Drawing would be
A)debit C. Finley, Capital, $3,000; credit C. Finley, Drawing, $3,000
B)debit C. Finley, Capital, $12,000; credit C. Finley, Drawing, $12,000
C)debit C. Finley, Drawing, $3,000; credit C. Finley, Capital, $3,000
D)debit C. Finley, Drawing, $12,000; credit C. Finley, Capital, $12,000
Q4) When the end-of-period spreadsheet is complete,the Adjustments columns should have
A)total credits greater than total debits if a net income was earned
B)total debits greater than total credits if a net loss was incurred
C)total debits greater than total credits if a net income was earned
D)total debits equal to total credits
Q5) Describe a classified balance sheet.
Page 6
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Chapter 5: Accounting Systems
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Sample Questions
Q1) The format and number of specialized journals that a business uses depend upon the legal organization of the business.
A)True
B)False
Q2) Using the Internet to perform business transactions is called e-commerce.
A)True
B)False
Q3) Record purchase on account from vendor
A)Purchases journal
B)Revenue journal
C)Cash receipts journal
D)Cash payments journal
E)Accounts receivable subsidiary ledger
F)Accounts payable subsidiary ledger
G)General journal
Q4) When posting column totals in the purchases journal,a credit should be posted to
A)Merchandise Inventory
B)Accounts Payable
C)Sales Returns and Allowances
D)Cash
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Chapter 6: Accounting for Merchandising Businesses
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Sample Questions
Q1) Informs the seller of the reasons for the return of merchandise or the request for a price allowance.
A)Freight
B)Delivery Expense
C)Merchandise Inventory
D)Sales discount
E)Purchases Returns and Allowances
F)Debit memo
G)Purchase discount
H)Trade discount
Q2) Conquest Company uses a perpetual inventory system.Conquest purchased $1,500 of merchandise on account and payment was made within the discount period.The credit terms were 2/10,n/30.Journalize Conquest's purchase and payment.
Q3) Most companies will not take a purchase discount,because 1% or 2% discounts are insignificant.
A)True
B)False
Q4) On March 29,customers who owe $10,500 on account to Sonic Sales Company submit payments of $4,250.Journalize this event.
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Chapter 7: Inventories
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Sample Questions
Q1) Assuming that the company uses the perpetual inventory system,determine the cost of merchandise sold for the sale of May 20 using the FIFO inventory cost method.
A)$120
B)$180
C)$136
D)$144
Q2) During periods of increasing costs,the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method.
A)True
B)False
Q3) Merchandise inventory at the end of the year was understated.Which of the following statements correctly states the effect of the error?
A)Net income is understated.
B)Net income is overstated.
C)Cost of merchandise sold is understated.
D)Merchandise inventory reported on the balance sheet is overstated.
Q4) List three different security measures taken to safeguard inventory.
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9
Chapter 8: Internal Control and Cash
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Sample Questions
Q1) Accompanying the bank statement was a debit memo for an NSF check received from a customer.What entry is required in the company's accounts?
A)debit Other Income; credit Cash
B)debit Cash; credit Other Income
C)debit Cash; credit Accounts Receivable
D)debit Accounts Receivable; credit Cash
Q2) A $150 petty cash fund has cash of $54 and receipts of $83.The journal entry to replenish the account would include a
A)credit to Petty Cash for $29
B)debit to Cash for $83
C)debit to Cash Short and Over for $13
D)credit to Cash for $54
Q3) Which of the following should not be considered cash by an accountant?
A)money orders
B)bank checking accounts
C)postage stamps
D)travelers' checks
Q4) List the principal advantages of electronic funds transfers.
Q5) Why would a bank require a company to maintain a compensating balance?
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Chapter 9: Receivables
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Sample Questions
Q1) Discuss the two methods for recording bad debt expense.What type of company uses each method?
Q2) When comparing the direct write-off method and the allowance method of accounting for uncollectible receivables,a major difference is that the direct write-off method
A)uses a percentage of sales to estimate uncollectible accounts
B)is used primarily by large companies with many receivables
C)is used primarily by small companies with few receivables
D)uses an allowance account
Q3) On October 1,Black Company receives a 9% interest-bearing note from Reese Company to settle a $20,000 account receivable.The note is due in six months.At December 31,Black should record interest revenue of
A)$0
B)$450
C)$900
D)$1,800
Q4) Small companies can use either the direct write-off method or the allowance method.
A)True
B)False
Page 11
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Chapter 10: Long-Term Assets: Fixed and Intangible
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Sample Questions
Q1) Standby equipment held for use in the event of a breakdown of regular equipment is reported as property,plant,and equipment on the balance sheet.
A)True
B)False
Q2) The transfer to expense of the cost of intangible assets attributed to the passage of time or decline in usefulness is called amortization.
A)True
B)False
Q3) A machine costing $57,000 with a six-year life and $54,000 depreciable cost was purchased January 1.Compute the yearly depreciation expense using straight-line depreciation.
Q4) Newport Company has sales of $2,025,000 for the current year.The book value of its fixed assets at the beginning of the year was $550,000 and at the end of the year was $800,000.The fixed asset turnover ratio for Newport is
A)3.0
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Page 12
Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) The proceeds from discounting a $20,000,60-day note payable at 6% is $20,200.
A)True
B)False
Q2) An unfunded pension liability is reported on the balance sheet as
A)a current liability
B)owner's equity
C)a long-term liability
D)a current liability or long-term liability, depending on when the pension liability is to be paid
Q3) An employee receives an hourly wage rate of $15,with time-and-a-half for all hours worked in excess of 40 during the week.Payroll data for the current week are as follows: hours worked,48; federal income tax withheld,$120; social security tax rate,6.0%; Medicare tax rate,1.5%; state unemployment compensation tax,3.4% on the first $7,000; and federal unemployment compensation tax,0.8% on the first $7,000.What is the net amount to be paid to the employee?
A)$568.74
B)$601.50
C)$660.00
D)$574.90
Q4) List five internal controls that relate directly to payroll.
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Chapter 12: Accounting for Partnerships and Limited Liability Companies
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Q1) When a partner withdraws from the partnership,the partnership dissolves.
A)True
B)False
Q2) Nick is admitted to an existing partnership by investing cash.Nick agrees to pay a bonus for his ownership interest because of the past success of the partnership.When Nick's investment in the partnership is recorded,
A)his capital account will be credited for more than the cash he invested
B)his capital account will be credited for the amount of cash he invested
C)a bonus will be credited for the amount of cash he invested
D)a bonus will be distributed to the old partners' capital accounts
Q3) The Craig-Doran Partnership owns inventory that was purchased for $85,000,has a current replacement cost of $54,500,and is priced to sell for $98,000.At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted?
A)$98,000
B)$54,500
C)$85,000
D)$79,167
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Chapter 13: Corporations: Organization, stock Transactions, and Dividends
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Q1) A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9.Subsequently,the company declared a 2% stock dividend on a date when the market price was $10 per share.The effect of the declaration and issuance of the stock dividend is to
A)decrease retained earnings, increase common stock, and increase paid-in capital
B)increase retained earnings, decrease common stock, and decrease paid-in capital
C)increase retained earnings, decrease common stock, and increase paid-in capital
D)decrease retained earnings, increase common stock, and decrease paid-in capital
Q2) The net increase or decrease in Retained Earnings for a period is recorded by closing entries.
A)True
B)False
Q3) The stock dividends distributable account is listed in the Current liabilities section of the balance sheet.
A)True
B)False
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Page 15
Chapter 14: Long-Term Liabilities: Bonds and Notes
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Q1) Premium on bonds payable may be amortized by the straight-line method if the results obtained by its use do not materially differ from the results obtained by use of the interest method.
A)True
B)False
Q2) The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.
A)True
B)False
Q3) Bonds Payable has a balance of $900,000,and Premium on Bonds Payable has a balance of $10,000.If the issuing corporation redeems the bonds at 103,what is the amount of gain or loss on redemption?
A)$1,200 loss
B)$1,200 gain
C)$17,000 loss
D)$17,000 gain
Q4) A $500,000 bond issue on which there is an unamortized discount of $35,000 is redeemed for $475,000.Journalize the redemption of the bonds.
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Page 16
Chapter 15: Investments and Fair Value Accounting
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Q1) Foreign currency translation adjustment is an example of an item that would be included in other comprehensive income.
A)True
B)False
Q2) Which of the following is not a part of comprehensive income?
A)foreign currency items
B)cash flows from stock investments
C)unrealized gains and losses on available-for-sale securities
D)pension liability adjustments
Q3) Measurement of the rate of return to stockholders based on cash dividends
A)Equity method
B)Parent company
C)Subsidiary company
D)Consolidated financial statements
E)Fair value
F)Unrealized gain or loss on investments.
G)Valuation allowance for investments
H)Dividend yield
I)Amortized cost
J)Cost method
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Chapter 16: Statement of Cash Flows
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Q1) Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity.
A)True
B)False
Q2) Sales for the year were $600,000.Accounts receivable were $100,000 and $80,000 at the beginning and end of the year,respectively.Cash received from customers to be reported on the statement of cash flows using the direct method is
A)$700,000
B)$600,000
C)$580,000
D)$620,000
Q3) Connor Designs Company has cash flows for operating activities of $425,000.Cash flows used for investments in property,plant,and equipment totaled $65,000,of which 70% was used to replace machinery to maintain existing capacity.What is the free cash flow for Connor Designs?
Q4) A cash flow per share amount should be reported on the statement of cash flows.
A)True
B)False
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Chapter 17: Financial Statement Analysis
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Q1) The excess of current assets over current liabilities is referred to as working capital.
A)True
B)False
Q2) Which of the following is the most useful in analyzing companies of different sizes?
A)comparative statements
B)common-sized financial statements
C)price-level accounting
D)audit report
Q3) Percentage analyses,ratios,turnovers,and other measures of financial position and operating results are
A)a substitute for sound judgment
B)useful analytical measures
C)enough information for analysis; industry information is not needed
D)unnecessary for analysis if industry information is available
Q4) What information is generally included in the Management's Discussion and Analysis
(MD&A)section of a corporate annual report?
Q5) Define solvency and profitability.How are they alike?
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