Managerial Accounting Test Bank
Course Introduction
Managerial Accounting focuses on the use of accounting information by managers within organizations to make informed business decisions. The course covers key concepts such as cost behavior, budgeting, variance analysis, performance measurement, and decision-making processes. Students learn how to analyze financial data, prepare internal reports, and apply various costing methods to planning and control activities. Through case studies and practical exercises, the course emphasizes the role of managerial accounting in strategy development, operational efficiency, and overall organizational success.
Recommended Textbook
Financial and Managerial Accounting 12th Edition by Carl
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27 Chapters
4697 Verified Questions
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Page 2
S. Warren
Chapter 1: Introduction to Accounting and Business
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187 Verified Questions
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Sample Questions
Q1) The asset created by a business when it makes a sale on account is termed
A) accounts payable
B) prepaid expense
C) unearned revenue
D) accounts receivable
Answer: D
Q2) Given the following data: \(\begin{array}{lrc} &\text { Dec. } 31,2014& \text { Dec. 31,2013 } \\ \text { Total liabilities } & \$ 128,250 & \$ 120,000 \\ \text { Total stockholders' equity } & 95,000 & 80,000 \end{array}\) Compute the ratio of liabilities to stockholders' equity for each year. Round to two decimal places.
A) 1.50 and 1.07, respectively
B) 1.35 and 1.50, respectively
C) 1.07 and 1.19, respectively
D) 1.19 and 1.35, respectively
Answer: B
Q3) What are the three sections of the statement of cash flows?
Answer: Operating Activities, Investing Activities, and Financing Activities
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Page 3
Chapter 2: Analyzing Transactions
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Sample Questions
Q1) Accounts are classified in the ledger
A) chronologically
B) alphabetically
C) in accordance with their appearance in the financial statements
D) so that accounts used most often are listed first
Answer: C
Q2) Liabilities are debts owed by the business entity.
A)True
B)False
Answer: True
Q3) Journalizing eliminates fraud.
A)True
B)False Answer: False
Q4) Journal entries can have more than two accounts as long as the debits equal the credits.
A)True
B)False Answer: True
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) On April 30, a business estimates depreciation on equipment used during the first year of operations to be $2,900. (a) Journalize the adjusting entry required as of April 30. (b) If the adjusting entry in (a) were omitted, which items would be erroneously stated on (1) the income statement for the year and (2) the balance sheet as of April 30?
Answer: 11ed76d4_49bc_12f9_b0b4_8d1833f3be0a_TB2083_11
Q2) Adjusting journal entries are dated on the last day of the period.
A)True
B)False
Answer: True
Q3) Accrued expenses are ordinarily reported on the balance sheet as A) assets
B) liabilities
C) fixed assets
D) prepaid expenses
Answer: B
Q4) Unearned revenue is a liability.
A)True
B)False Answer: True
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) The totals of the Adjusted Trial Balance columns on a work sheet will always be the sum of the Trial Balance column totals and the Adjustments column totals.
A)True
B)False
Q2) Unearned Fees appear on the
A) balance sheet in the current assets section
B) balance sheet as a current liability
C) balance sheet in the stockholders' equity section
D) income statement as revenue
Q3) During the closing process, some balance sheet accounts are closed and end the period with a zero balance.
A)True
B)False
Q4) A work sheet includes columns for
A) adjusting entries
B) closing entries
C) reversing entries
D) adjusting and closing entries
Q5) Explain how net income or loss is determined by using the work sheet.
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Chapter 5: Accounting for Merchandising Businesses
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Sample Questions
Q1) Income that cannot be associated definitely with operations, such as a gain from the sale of a fixed asset, is listed as Other Income on the multiple-step income statement.
A)True
B)False
Q2) The abbreviation FOB stands for Free On Board.
A)True
B)False
Q3) Dorman Co. sold merchandise to Smith Co. on account, $23,500, terms 2/15, net 45. The cost of the merchandise sold is $16,000. Dorman Co. issued a credit memo for $1,750 for merchandise returned that originally cost $1,400. The Smith Co. paid the invoice within the discount period. What is amount of net sales from the above transactions?
A) $23,030
B) $21,750
C) $21,315
D) $13,808
Q4) Retailers record all credit card sales as credit sales.
A)True
B)False
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Chapter 6: Inventories
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Sample Questions
Q1) The following units of an inventory item were available for sale during the year: \(\begin{array}{ll}
\text { Beginning inventory } & 10 \text { units at } \$ 55 \\
\text { First purchase } & 25 \text { units at } \$ 60 \\
\text { Second purchase } & 30 \text { units at } \$ 65 \\
\text { Third purchase } & 15 \text { units at } \$ 70 \end{array}\) The firm uses the periodic inventory system. During the year, 60 units of the item were sold.
The value of ending inventory using LIFO is:
A) $1,250
B) $1,350
C) $1,375
D) $1,150
Q2) The selection of an inventory costing method has no significant impact on the financial statements.
A)True
B)False
Q3) While taking a physical inventory, a company counts their inventory as less than the actual amount on hand. How will this error affect the income statement?
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Page 8
Chapter 7: Sarbanes-Oxley, Internal Control, and Cash
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Sample Questions
Q1) If an adjustment for an NSF check is made in a company's bank reconciliation, then the company must have written a bad check during the month.
A)True
B)False
Q2) For each of the following, explain whether the issue would require you to prepare a journal entry for your company, assuming any original entry is correct. If an entry is required, please include it as part of your answer.
(1) The bank recorded your deposit as $91 rather than the actual amount of $191.
(2) Two outstanding checks amounted to $450.
(3) Company check number 538 for postage was recorded incorrectly by the company bookkeeper as $50 instead of $59.
(4) The bank paid a check for $500 after the company had issued a stop payment and voided the check.
(5) An EFT deposit was made by one of the company's customers, Atlas Design, for merchandise received. The sale had previously been recorded when shipped and was equal to the payment amount of $125.
Q3) Why would a bank require a company to maintain a compensating balance?
Q4) List the principal advantage of Electronic Funds Transfers.
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Page 9
Chapter 8: Receivables
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Sample Questions
Q1) Other than accounts receivable and notes receivable, name other receivables that might be included in the general ledger.
Q2) Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment). The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to be $31,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year?
A) debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200
B) debit Allowance for Doubtful Accounts, $34,200; credit Bad Debt Expense, $34,200
C) debit Allowance for Doubtful Accounts, $29,600; credit Bad Debt Expense, $29,600
D) debit Bad Debt Expense, $29,600; credit Allowance for Doubtful Accounts, $29,600
Q3) Discuss the similarities and differences between accounts receivables, notes receivables and other receivables.
Q4) List at least three things that indicate a receivable may be uncollectible.
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10
Chapter 9: Fixed Assets and Intangible Assets
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Sample Questions
Q1) The depreciation method that does not use residual value in calculating the first year's depreciation expense is
A) straight-line
B) units-of-production
C) double-declining-balance
D) none of the above
Q2) A machine costing $85,000 with a 5-year life and $5,000 residual value was purchased January 2, 2011. Compute depreciation for each of the five years, using the declining-balance method at twice the straight-line rate.
Q3) The units of production depreciation method provides a good match of expenses against revenue.
A)True
B)False
Q4) An estimate of the amount which an asset can be sold at the end of its useful life is called residual value.
A)True
B)False
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Chapter 10: Current Liabilities and Payroll
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Sample Questions
Q1) Mobile Co. issued a $45,000, 60-day, discounted note to Guarantee Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will pay:
A) $45,450
B) $42,300
C) $45,000
D) $44,550
Q2) A pension plan which requires the employer to make annual pension contributions, with no promise to employees regarding future pension payments, is termed
A) funded
B) unfunded
C) defined benefit
D) defined contribution
Q3) The journal entry a company uses to record the estimated accrued product warranty liability is
A) debit Product Warranty Expense; credit Product Warranty Payable
B) debit Product Warranty Payable; credit Cash
C) debit Product Warranty Expense; credit Cash
D) debit Product Warranty Payable; credit Product Warranty Expense
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12
Chapter 11: Corporations: Organization, Stock Transactions, and Dividends
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Sample Questions
Q1) On May 10, a company issued for cash 1,500 shares of no-par common stock (with a stated value of $2) at $14, and on May 15, it issued for cash 2,000 shares of $15 par preferred stock at $58.
Journalize the entries for May 10 and 15, assuming that the common stock is to be credited with the stated value.
Q2) The number of shares of outstanding stock is equal to the number of shares authorized minus the number of shares issued.
A)True
B)False
Q3) Vincent Corporation has 100,000 share of $100 par common stock outstanding. On June 30, Vincent Corporation declared a 5% stock dividend to be issued on July 30 to stockholders of record July 15. The market price of the stock was $132 a share on June 30.
Journalize the entries required on June 30, July 15 and July 30.
Q4) When a stock dividend is declared, which of the following accounts is credited?
A) Common Sock
B) Dividend Payable
C) Stock Dividends Distributable
D) Retained Earnings
Page 13
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Chapter 12: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) On January 1, 2014, Gemstone Company obtained a $165,000, 10-year, 7% installment note from Guarantee Bank. The note requires annual payments of $23,492, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $11,550 and principal repayment of $11,942. The journal entry to record the payment of the first annual amount due on the note would include:
A) a debit to cash of $11,942
B) a credit to Interest Payable of $11,550
C) a debit to Notes Payable of $11,942
D) a debit to Interest Expense of $23,492
Q2) When the market rate of interest was 11%, Munson Corporation issued $1,000,000, 12%, 8-year bonds that pay interest semiannually. The selling price of this bond issue was
A) $1,052,310
B) $1,154,387
C) $1,000,000
D) $ 720,495
Q3) Bondholders claims on the assets of the corporation rank ahead of stockholders.
A)True
B)False
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Chapter 13: Investments and Fair Value Accounting
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Sample Questions
Q1) When a corporation owns less than 20% of the stock of another company, dividends received are not treated as income.
A)True
B)False
Q2) Jacks Corporation purchases $200,000 bonds plus accrued interest for 2 months of $2,000 from Kennedy Company on March 1. The bonds have an annual interest rate of 6% payable on June 30 and December 31. The entry to record the purchase of the bonds would include:
A) Interest Receivable debit $2,000
B) Investment in Bonds debit $202,000.
C) Cash debit $200,000
D) Interest Revenue credit $2,000.
Q3) Held to maturity securities
A) are reported at fair market value
B) include stocks as well as bonds
C) may be reported as current or noncurrent assets
D) all of the above
Q4) Comprehensive income must be reported on the income statement.
A)True
B)False
Page 15
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) Equipment with an original cost of $75,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000. As a result of this transaction, cash would
A) increase by $48,000
B) decrease by $7,000
C) increase by $55,000
D) decrease by $27,000
Q2) Which of the following concepts of cash is not appropriate to use in preparing the statement of cash flows?
A) cash
B) cash and money market funds
C) cash and cash equivalents
D) cash and U.S. treasury bonds
Q3) Using the indirect method, if land costing $85,000 was sold for $145,000, the amount reported in the financing activities section of the statement of cash flows would be $85,000.
A)True
B)False
Q4) Fortune Corporation's comparative balance sheet for current assets and liabilities was as follows:
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability. The amount of working capital immediately after payment is
A) $845,000
B) $595,000
C) $720,000
D) $125,000
Q2) When the rate of return on total assets ratio is greater than the rate of return on common stockholders' equity ratio, the management of the company has effectively used leverage.
A)True
B)False
Q3) Factors which reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency and profitability.
A)True
B)False
Q4) Why would you compare or not compare Coca-Cola and Pepsi-Cola (PepsiCo) as companies to each other?
Q5) Define solvency and profitability. How are they alike?
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Chapter 16: Managerial Accounting Concepts and Principles
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Sample Questions
Q1) If the cost of direct materials is a small portion of total production cost, it may be classified as part of:
A) direct labor cost
B) selling and administrative costs
C) miscellaneous costs
D) factory overhead cost
Q2) Prime costs consists of direct materials, indirect materials, and direct labor.
A)True
B)False
Q3) Goods that are partway through the manufacturing process, but not yet complete, are referred to as materials inventory.
A)True
B)False
Q4) Factory overhead includes all manufacturing costs except direct materials and direct labor.
A)True
B)False
Q5) Period costs include direct materials and direct labor.
A)True
B)False
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Chapter 17: Job Order Costing
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Sample Questions
Q1) The finished goods account is the controlling account for the:
A) cost ledger
B) materials ledger
C) work in process ledger
D) stock ledger
Q2) A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $360,000 and direct labor hours would be 30,000. Actual factory overhead costs incurred were $377,200, and actual direct labor hours were 36,000. What is the amount of overapplied or underapplied manufacturing overhead at the end of the year?
A) $6,000 overapplied.
B) $6,000 underapplied.
C) $54,800 overapplied.
D) $54,800 underapplied.
Q3) If factory overhead applied exceeds the actual costs, overhead is said to be underapplied.
A)True
B)False
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Chapter 18: Process Cost Systems
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Sample Questions
Q1) Which of the following is not characteristic of a process cost system?
A) The system may use several work in process inventory accounts.
B) Manufacturing costs are grouped by department rather than by jobs.
C) The system accumulates costs per job.
D) The system emphasizes time periods rather than the time it takes to complete a job.
Q2) Both process and job order cost systems maintain perpetual inventory accounts with subsidiary ledgers.
A)True
B)False
Q3) Department S had no work in process at the beginning of the period. 12,000 units of direct materials were added during the period at a cost of $84,000, 9,000 units were completed during the period, and 3,000 units were 30% completed as to labor and overhead at the end of the period. All materials are added at the beginning of the process. Direct labor was $49,500 and factory overhead was $9,900. The total conversion costs for the period were:
A) $59,400
B) $49,500
C) $143,400
D) $9,900
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Page 20
Chapter 19: Cost Behavior and Cost-Volume-Profit Analysis
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Sample Questions
Q1) For the past year, Hornbostel Company had fixed costs of $6,552,000, a unit variable cost of $444, and a unit selling price of $600. For the coming year, no changes are expected in revenues and costs, except that a new wage contract will increase variable costs by $6 per unit. Determine the break-even sales (units) for (a) the past year and (b) the coming year.
Q2) Costs that remain constant in total dollar amount as the level of activity changes are called:
A) fixed costs
B) mixed costs
C) product costs
D) variable costs
Q3) Spice Inc.'s unit selling price is $60, the unit variable costs are $35, fixed costs are $125,000, and current sales are 10,000 units. How much will operating income change if sales increase by 8,000 units?
A) $150,000 decrease
B) $175,000 increase
C) $200,000 increase
D) $150,000 increase
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21
Chapter 20: Variable Costing for Management Analysis
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Sample Questions
Q1) If the ability to sell and the amount of production facilities devoted to each of two products is equal, it is profitable to increase the sales of that product with the lowest contribution margin.
A)True
B)False
Q2) On the variable costing income statement, the figure representing the difference between the contribution margin and income from operations is the fixed manufacturing costs and fixed selling and administrative expenses.
A)True
B)False
Q3) Under absorption costing, increases or decreases in income from operations due to changes in inventory levels could be misinterpreted to be the result of operating efficiencies or inefficiencies.
A)True
B)False
Q4) A change in the amount of sales can be due to either a change in the units sold or a change in price or both.
A)True
B)False
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Chapter 21: Budgeting
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Sample Questions
Q1) Magnolia, Inc. manufactures bedding sets. The budgeted production is for 55,000 comforters in 2012. Each comforter requires 7 yards of material. The estimated January 1, 2012, beginning inventory is 31,000 yards. The desired ending balance is 30,000 yards of material. If the material costs $4.00 per yard, determine the materials budget for 2012.
Q2) Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12 per unit, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units. Budgeted purchases of Product A for the year would be:
A) 22,400 units
B) 20,400 units
C) 20,000 units
D) 12,200 units
Q3) The cash budget summarizes future plans for acquisition of fixed assets.
A)True
B)False
Q4) Why is the sales budget usually prepared first?
Q5) Describe at least five benefits of budgeting.
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Chapter 22: Performance Evaluation Using Variances From
Standard Costs
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Sample Questions
Q1) Ruby Company produces a chair that requires 5 yds. of material per unit. The standard price of one yard of material is $7.50. During the month, 8,500 chairs were manufactured, using 43,600 yards at a cost of $7.55 per yard. Determine the (a) price variance, (b) quantity variance, and (c) cost variance.
Q2) In most businesses, cost standards are established principally by accountants. A)True B)False
Q3) Nonfinancial performance output measures are used to improve the input measures.
A)True B)False
Q4) The difference between the standard cost of a product and its actual cost is called a variance.
A)True B)False
Q5) Normally standard costs should be revised when labor rates change to incorporate new union contracts.
A)True B)False
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Chapter 23: Performance Evaluation for Decentralized Operations
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Q1) Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5 per unit. However, the same materials are available from Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6's current sales. How much would Square Yard Products total income from operations increase?
A) $32,000
B) $112,000
C) $80,000
D) $150,000
Q2) Purchase requisitions for Purchasing and the number of payroll checks for Payroll Accounting are examples of activity bases.
A)True
B)False
Q3) The DuPont formula uses financial information to measure the performance of a business.
A)True
B)False
Page 25
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Chapter 24: Differential Analysis and Product Pricing
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Sample Questions
Q1) When using the total cost concept of applying the cost-plus approach to product pricing, what is included in the markup?
A) Total selling and administrative expenses plus desired profit
B) Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit
C) Total costs plus desired profit
D) Desired profit
Q2) The desired selling price for a product will be the same under both variable and total cost.
A)True
B)False
Q3) Contractors who sell to government agencies would be most likely to use which of the following cost concepts in pricing their products?
A) Variable cost
B) Product cost
C) Total cost
D) Fixed cost
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Chapter 25: Capital Investment Analysis
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Sample Questions
Q1) Net present value and the payback period are examples of discounted cash flow methods used in capital budgeting decisions.
A)True
B)False
Q2) A company is planning to purchase a machine that will cost $24,000, have a six-year life, and have no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. Total income over the life of the machine is estimated to be $12,000. The machine will generate cash flows per year of $6,000. The payback period for the machine is 12 years.
A)True
B)False
Q3) A company is considering the purchase of a new machine for $48,000. Management expects that the machine can produce sales of $16,000 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $8,000 per year plus depreciation of $4,000 per year. All revenues and expenses except depreciation are on a cash basis. The payback period for the machine is 6 years.
A)True
B)False
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Chapter 26: Cost Allocation and Activity-Based Costing
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Sample Questions
Q1) All of the following can be used as an allocation base for calculating factory overhead rates except:
A) direct labor dollars
B) direct labor hours
C) machine hours
D) total overhead costs
Q2) The Anazi Leather Company manufactures leather handbags (H) and moccasins (M). The company has been using the factory overhead rate method but has decided to evaluate the multiple production department factory overhead rate to allocate factory overhead. The factory overhead estimated per unit together with direct materials and direct labor will help determine selling prices.
Q3) Service companies can effectively use activity-based costing to compute product (service) costs.
A)True
B)False
Q4) When a plantwide factory overhead rate is used, overhead costs are applied to all products by a single rate.
A)True
B)False
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Chapter 27: Cost Management for Just-In-Time
Environments
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Sample Questions
Q1) A college would like to increase enrollment by streamlining the enrollment process. Which of the following would not fall in line with the college goal?
A) Reduce the requirements necessary to enroll.
B) Relocate counselors, academic advisors, and financial aid specialists for a major to a central location.
C) Cross-train counselors, academic advisors, and financial aid specialists.
D) All of the above would fall in line with the college goal.
Q2) Financial accounting information is used more often for long-term operating decisions and non-financial information is used more often for day-to-day decisions.
A)True
B)False
Q3) Lead time is the process time between start and completion.
A)True
B)False
Q4) Lead time includes both value-added time and non-value-added time.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 29