Accounting for Managers
Exam Answer Key
Course Introduction
Accounting for Managers provides an essential overview of accounting principles and practices tailored for managerial decision-making. The course emphasizes the interpretation and use of financial information for planning, controlling, and evaluating business operations. Students learn to analyze financial statements, understand cost behaviors, prepare budgets, and evaluate performance using managerial accounting tools. By focusing on real-world applications, the course equips future managers with the skills necessary to make informed financial decisions that align with organizational objectives.
Recommended Textbook
Introduction to Financial Accounting 11th Edition by Charles T. Horngren
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12 Chapters
1592 Verified Questions
1592 Flashcards
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Page 2
Chapter 1: Accounting: the Language of Business
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) The American Institute of Certified Public Accountants prepares and grades a CPA exam on a national basis.
A)True
B)False
Answer: True
Q2) Buying on credit creates an account receivable.
A)True
B)False
Answer: False
Q3) An example of stockholders' equity is
A)accounts payable.
B)accounts receivable.
C)capital stock.
D)marketable securities.
E)cash and cash equivalents.
Answer: C
Q4) Statement of financial position is another name for the balance sheet.
A)True
B)False
Answer: True
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Chapter 2: Measuring Income to Assess Performance
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136 Flashcards
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Sample Questions
Q1) Cash dividends
A)are distributions of cash to trade creditors.
B)are expenses like rent and depreciation.
C)should not be deducted from revenues on the income statement.
D)must be paid annually,regardless of the amount of cash in the bank.
E)cannot be paid if a net loss is incurred.
Answer: C
Q2) Describe the advantages of the accrual basis of accounting and the cash basis of accounting.
Answer: The cash basis of accounting has the advantage of producing financial statements when cash is received and paid,giving users a clearer picture of the company's cash position.Proponents suggest that this is important since companies can appear to be doing well based on net income,yet go bankrupt for a lack of cash.The accrual basis of accounting has the advantage of producing a more complete summary of the entity's value-producing activities since it recognizes revenues when they are earned and expenses when they are incurred.
Q3) Accrual accounting uses the matching principle.
A)True
B)False
Answer: True
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Chapter 3: Recording Transactions
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126 Flashcards
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Sample
Questions
Q1) Grogle Company had to calculate book value on its die cutting machine.The company paid $32,000 for the equipment on January 1,2012,but its current appraised value is $46,000.On December 31,2015,accumulated depreciation on the machine is $12,000.What is Grogle Company's book value on the die cutting machine at December 31,2015?
A)$14,000
B)$32,000
C)$46,000
D)$20,000
E)$34,000
Answer: D
Q2) Which of the following would not be found in a general journal?
A)The ending balance in an account
B)Separate columns for debits and credits
C)The date of the transaction
D)The account names in a transaction
E)A posting reference
Answer: A
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Chapter 4: Accrual Accounting and Financial Statements
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Sample Questions
Q1) Briefly explain the difference between operating income and net income.Why do companies calculate both?
Q2) Examples of adjusting for asset expirations include the write-offs to expense of such assets as Office Supplies and Prepaid Insurance.
A)True
B)False
Q3) Recording revenue in 2012 that is actually earned in 2013 will result in:
A)overstatement of net income in 2012
B)overstatement of net income in 2013
C)understatement of net income in 2013
D)an overstatement of net income in 2012 and an understatement in net income in 2013
E)an overstatement of net income in 2013 and an understatement in net income in 2012
Q4) Some explicit transactions (e.g.,the loss of assets due to fire)do not involve actual exchanges of goods and services between parties.
A)True
B)False
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Chapter 5: Statement of Cash Flows
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Sample Questions
Q1) A company acquired a small building by signing a mortgage payable.How would this transaction be shown in the statement of cash flows? Explain how this treatment fulfills the investors' need for information regarding the financial management of the company.
Q2) When an increase in cash occurs,it ensues from A)increases in assets.
B)increases in liabilities.
C)increases in paid-in-capital.
D)both A and B
E)both B and C
Q3) Referring to Exhibit 5-1,what were the dividends paid by Cartell Paper Products in 2012?
A)$11,900
B)$0
C)$22,600
D)$4,000
E)$9,300
Q4) What does a positive free cash flow tell investors about a company's ability to produce cash flows from operations and make necessary investments?
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Chapter 6: Accounting for Sales
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Sample Questions
Q1) Name the five steps for revenue recognition proposed by the joint discussions between the FASB and IASB.
Q2) Cash Discounts on Sales are
A)a contra account to Accounts Receivable.
B)a contra account to Accounts Payable.
C)a contra account to gross sales.
D)an adjunct account to gross sales.
E)neither an addition nor a deduction to gross sales.
Q3) In its first year of operations,20X2,Flow Crafts,Inc.,had credit sales of $420,000 to many different customers.Of this amount,P.Walker purchased $400 and J.Jocke purchased $180 on account.During the year,cash collections of $389,000 were made,of which P.Walker paid $360 and J.Jocke paid $60.At the end of 20X2,bad debts expense was estimated to be 5% of ending accounts receivable.At December 31,20X2,the Allowance for Uncollectible Accounts is $0.On February 23,20X3,the balance in J.Jocke's account was written off as uncollectible.
Prepare the appropriate journal entry on the books of Flow Crafts,Inc.for
a.the $420,000 in credit sales.
b.the collection of $389,000 from credit customers.
c.the estimation of bad debts expense.
d.the write-off of J.Jocke's account.
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Chapter 7: Inventories and Cost of Goods Sold
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Sample Questions
Q1) In a transaction where the merchandise invoice indicates F.O.B.shipping point,who pays the cost of shipping?
A)The buyer
B)The seller
C)The common carrier
D)The freight forwarder
E)None of the above
Q2) The two main types of inventory systems are the periodic system and the gross margin method.
A)True
B)False
Q3) Which of the following inventory methods physically links the particular items sold with the actual cost of goods sold for the items sold?
A)FIFO
B)LIFO
C)Weighted-average
D)Specific identification
E)FIFO and LIFO
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Chapter 8: Long-Lived Assets
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Sample Questions
Q1) A goodwill write-off is a noncash expense.
A)True
B)False
Q2) Explain the concept of depreciation.Include in your discussion one common misconception regarding what depreciation represents.
Q3) If land was acquired many years ago,and inflation has occurred over time,the value of the land on the financial statements should be increased to reflect some of the change in the land's valuation.However,the land will still be valued at a relatively conservative amount.The company does not follow IFRS.
A)True
B)False
Q4) Treating a capital expenditure as repairs and maintenance expense
A)understates expenses and overstates owners' equity.
B)understates expenses and understates assets.
C)overstates expenses and understates net income.
D)overstates assets and overstates owners' equity.
E)overstates assets and overstates revenue.
Q5) Explain the concept of asset impairment.Include in your discussion the process of computing the impairment.
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Chapter 9: Liabilities and Interest
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Sample Questions
Q1) Expenses that have been incurred and recognized on the income statement but not yet paid are accrued liabilities.
A)True
B)False
Q2) Which statement is false?
A)The periodic interest payment on a bond is based upon the market rate of interest.
B)Typically when a company issues a bond,the company will sell the bonds to an underwriter,who in turn sells the bonds to the general public.
C)The nominal rate of interest and the market rate of interest are usually different on the date the bond is issued.
D)If a bond is sold at a price that is greater than face value,it is said to be sold at a premium.
E)If a bond is sold at a price that is less than face value,it is said to be sold at a discount.
Q3) Define a contingent liability and give an example.How are they reported on the balance sheet?
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) A stock split can be accounted for as a large stock dividend.
A)True
B)False
Q2) What is the market-to-book ratio?
A)market value of total company divided by book value per share
B)total stockholders' equity divided by the number of common shares outstanding
C)total stockholders' equity divided by the book value of common stock
D)market price per share divided by book value of assets
E)market price per share divided by book value per share
Q3) A characteristic of preferred stock that gives the issuer of the stock the right to buy the stock back from the owner at a fixed price is known as
A)participating.
B)cumulative.
C)convertible.
D)liquidating preference.
E)callable.
Q4) In general,what are the principal rights of shareholders?
Q5) Stock splits generally cause stock prices to fall.
A)True
B)False
Page 12
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Chapter 11: Intercorporate Investments and Consolidations
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110 Flashcards
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Sample Questions
Q1) As the market value of available-for-sale securities changes,companies report the gains from increases in market value and losses from decreases in market value on the income statement.
A)True
B)False
Q2) Consolidated financial statements
A)are used to offset gains and losses on the parent company's income statement.
B)combine the financial records of two or more separate legal entities.
C)make clear distinctions between principal and secondary long-term asset owners.
D)provide a depiction of process costs.
E)must provide predetermined overhead costs with earnings per share in the annual report.
Q3) ________ are current investments in equity or debt securities held for short-term profit.
A)Short-term equity securities
B)Trading securities
C)Held-to-maturity securities
D)Available-for-sale securities
E)Cash equivalents
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Page 13
Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) Zeman Company has the following data: \(\begin{array}{llll} &2X13&2X12&2X11\\
\text { Sales (all credit sales) } & \$ 800 & \$ 740 & \$ 675 \\
\text { Less Cost of Goods Sold } & \underline{525} & \underline{490} &450\\
\text { Gross Profit }& \$ 275 &\$ 250 &\$ 225\\
\end{array}\) \(\begin{array} { l l l l }
\text { Operating Profit } &&&& \$ 125 & \$ 110 & \$ 104 \\
\text { Net Income } &&&& \$ 4 & \$56 & \$52 \end{array}\)
What is the return on sales for Zeman Company in 2X13? Has the return on sales improved or not improved since 2X12?
A)8.0%,improved
B)8.0%,not improved
C)14.4%,improved
D)34.4%,improved
E)34.4%,not improved
Q2) Growth stocks generally have a PEG ratio less than one.
A)True
B)False
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