Accounting for Managers Exam Review
Course Introduction
Accounting for Managers provides an essential overview of accounting principles, financial statements, and analytical techniques tailored for non-accounting professionals. The course focuses on the practical use of accounting information for informed decision-making, performance evaluation, and strategic planning within organizations. Students learn how to interpret financial reports, assess costs, create operating budgets, and apply key concepts such as variance analysis and break-even analysis to real-world management scenarios. By bridging the gap between technical accounting data and managerial action, the course equips future managers with the skills needed to communicate effectively with financial experts and make sound business decisions.
Recommended Textbook
Financial Accounting Information for Decisions 7th Edition by John J Wild
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Page 2
Chapter 1: Introducing Financial Accounting
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Sample Questions
Q1) The International Accounting Standards Board (IASB) issues International Financial Reporting Standards (IFRS) that identify preferred accounting practices.
A)True
B)False
Answer: True
Q2) According to the cost principle,it is preferable for managers to report the most current estimate of an asset's value.
A)True
B)False
Answer: False
Q3) U.S.government bonds are:
A)High-risk and high-return investments.
B)Low-risk and low-return investments.
C)High-risk and low-return investments.
D)Low-risk and high-return investments.
E)High risk and no-return investments.
Answer: B
Q4) ______________ is the area of accounting aimed at serving external users. Answer: Financial accounting
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Chapter 2: Accounting System and Financial Statements
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Sample Questions
Q1) A revenue account normally has a debit balance.
A)True
B)False
Answer: False
Q2) A credit entry:
A)Increases asset and expense accounts and decreases liability,common stock,and revenue accounts.
B)Is always a decrease in an account.
C)Decreases asset and expense accounts and increases liability,common stock,and revenue accounts.
D)Is recorded on the left side of a T-account.
E)Is always an increase in an account.
Answer: C
Q3) The process of transferring general journal information to the ledger is:
A)Double-entry accounting.
B)Posting.
C)Balancing an account.
D)Journalizing.
E)Not required unless debits do not equal credits.
Answer: B
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Chapter 3: Adjusting Accounts for Financial Statements
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Sample Questions
Q1) What is an adjusted trial balance? Why is it prepared?
Answer: An adjusted trial balance is a list of accounts and balances prepared after adjusting entries are recorded and posted to the ledger.The purpose of the adjusted trial balance is to ensure that total debits equal total credits for all accounts in the ledger.
Q2) Since the revenue recognition principle requires that revenues be earned,there are no unearned revenues in accrual accounting.
A)True
B)False
Answer: False
Q3) July 31,2013,the end of the quarter is on a Wednesday.Employees get paid each Friday for the week worked.Abel Co.has five employees who earn $100 per day each.Assuming the proper adjusting journal entry was made on June 30,prepare the journal entry to record the payment of wages on August 2.
Answer: 11ed5da7_fd25_d50a_bc14_df3a61712f91_TB6947_00
Q4) Adjusting entries result in a better matching of revenues and expenses.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Reporting and Analyzing Merchandising Operations
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Sample Questions
Q1) ___________ expenses are those expenses that support a company's overall operations and include expenses related to accounting,human resource management,and financial management.
Q2) The acid-test ratio reflects the ___________ of a company.
Q3) A company had a gross profit of $300,000 based on sales of $400,000,which means its cost of goods sold is equal to $700,000.
A)True
B)False
Q4) What is inventory shrinkage? How do managers account for shrinkage?
Q5) J.C.Penney had net sales of $24,750 million,cost of goods sold of $16,150 million,and net income of $837 million.Its gross margin ratio equals 3.4%.
A)True B)False
Q6) Assets tied up in inventory are referred to as nonproductive assets. A)True B)False
Page 6
Q7) Cost of goods sold represents the value of merchandise sold to customers. A)True B)False
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Chapter 5: Reporting and Analyzing Inventories
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Sample Questions
Q1) The reliability of the gross profit method depends on a good estimate of the gross profit ratio.
A)True
B)False
Q2) Identify the items that are included in merchandise inventory.(In your answer address the special situations of goods in transit,consigned goods,and damaged goods.)
Q3) The understatement of the ending inventory balance causes:
A)Cost of goods sold to be overstated and net income to be understated.
B)Cost of goods sold to be overstated and net income to be overstated.
C)Cost of goods sold to be understated and net income to be understated.
D)Cost of goods sold to be understated and net income to be overstated.
E)Cost of goods sold to be overstated and net income to be correct.
Q4) The inventory valuation method that tends to smooth out erratic changes in costs is:
A)FIFO
B)Weighted average
C)LIFO
D)Specific identification
E)WIFO
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Chapter 6: Reporting and Analyzing Cash and Internal Controls
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Sample Questions
Q1) On a bank reconciliation,an unrecorded debit memorandum for printing checks is:
A)Noted as a memorandum only.
B)Added to the book balance of cash.
C)Deducted from the book balance of cash.
D)Added to the bank balance of cash.
E)Deducted from the bank balance of cash.
Q2) In comparing the canceled checks on the bank statement with the entries in the accounting records,it is found that check number 4239 for November's rent was correctly written and drawn for $3,790 but was erroneously entered in the accounting records as $7,390.When reconciling the November bank statement,the company should:
A)Deduct $3,600 from the book balance of cash.
B)Add $3,700 to the bank statement balance.
C)Add $7,390 to the book balance of cash.
D)Deduct $3,600 from the bank statement balance.
E)Add 3,600 to the book balance of cash.
Q3) Internal control policies and procedures are the same for all companies.
A)True
B)False
Q4) What is the purpose of the petty cash account?
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Chapter 7: Reporting and Analyzing Receivables
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Sample Questions
Q1) Describe how accounts receivable arise and how they are accounted for,including the use of a subsidiary ledger and an allowance account.
Q2) Failure by a promissory note's maker to pay the amount due at maturity is known as:
A)Protesting a note
B)Closing a note
C)Dishonoring a note
D)Discounting a note
E)Depreciating a note
Q3) The advantage of the allowance method of accounting for uncollectible accounts is that it identifies the specific customers who do not pay their bills.
A)True
B)False
Q4) After adjustment,the allowance for doubtful accounts has the effect of reducing accounts receivable to its estimated realizable value.
A)True
B)False
Q5) How does Kevin Plank of UnderArmour,view decisions involving sales on credit?
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9
Chapter 8: Reporting and Analyzing Long-Term Assets
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Sample Questions
Q1) An asset's cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.
A)True
B)False
Q2) A company purchased mining property for $1,560,000.The property was estimated to contain 13,000,000 tons of ore.In the current year,the company removed and sold 247,000 tons of ore.Calculate the depletion expense for the current year.
Q3) A company had a bulldozer destroyed by fire.The bulldozer originally cost $125,000.The accumulated depreciation on it was $60,000.The proceeds from the insurance company were $90,000.The company should recognize:
A)A loss of $25,000.
B)A gain of $25,000.
C)A loss of $65,000.
D)A gain of $65,000.
E)A gain of $90,000.
Q4) ___________________ are additional costs of plant assets that do not materially increase the asset's life or productive capabilities.
Q5) What are the general accounting procedures for recording asset disposals?
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Chapter 9: Reporting and Analyzing Current Liabilities
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Sample Questions
Q1) The Edgartown Company borrowed $480,000 on December 1,2014.The note,which is due in 60 days,included interest at 8%.The company's fiscal year ends on December 31.How would the company record the adjusting entry relating to this note at December 31,2014?
A)Debit Interest Expense for $38,400 and credit Interest Payable for $38,400.
B)Debit Interest Expense for $6,400 and credit Interest Payable for $6,400.
C)Debit Interest Expense for $3,200 and credit Interest Payable for $3,200.
D)Debit Notes Payable for $483,200 and credit Cash for $483,200.
E)Debit Interest Expense for $3,200 and credit Cash for $3,200.
Q2) Describe how to account for and report on contingent liabilities.
Q3) An employee earned $47,000 during the year working for an employer.The FICA tax for social security is 6.2%,and the FICA tax for Medicare is 1.45%.The employee's share of FICA taxes is:
A)$681.50.
B)$2,914.00.
C)$3,595.50.
D)$7,191.00.
E)Zero,since the employee's pay exceeds the FICA limit.
Q4) Explain how to calculate times interest earned and how this ratio is used to analyze a company.
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Chapter 10: Reporting and Analyzing Long-Term Liabilities
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Sample Questions
Q1) On August 1,2013,a company issues bonds with a par value of $600,000.The bonds mature in 10 years and pay 6% annual interest,payable each February 1 and August 1.The bonds sold at $632,000.The company uses the straight-line method of amortizing bond premiums and discounts.The company's year-end is December 31.Prepare the general journal entry to record the interest accrued at December 31,2013.
Q2) On October 1 of the current year a corporation sold,at par plus accrued interest,$1,000,000 of its 12% bonds,which were dated July 1 of this year.What amount of bond interest expense should the company report on its current year income statement?
Q3) What is the debt to equity ratio for a company that has $700,000 in total liabilities and $3,500,000 in total equity?
A)20%
B)5
C)$2,100,000
D)2%
E).5
Q4) The _______________ amortization method allocates bond interest expense over the life of the bonds in a way that yields a constant rate of interest.
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Chapter 11: Reporting and Analyzing Equity
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Sample Questions
Q1) A company issued 7% preferred stock with a $100 par value.This means that:
A)Preferred shareholders have a guaranteed dividend.
B)The amount of the potential dividend is $7 per year per preferred share.
C)Preferred shareholders are entitled to 7% of the annual income.
D)The market price per share will approximate $100 per share.
E)Only 7% of the total contributed capital can be preferred stock.
Q2) What is treasury stock? How is the purchase and sale of treasury stock recorded?
Q3) _____________________ is a class of stock assigned a value by the corporation in its charter.
Q4) A company has 1,000 shares of $100 par preferred stock.It also has 25,000 shares of common stock outstanding and its total stockholders' equity equals $500,000.The book value per common share is:
A)$15.38
B)$16.00
C)$19.23
D)$20.00
E)$100.00
Q5) A corporation is responsible for its own acts and debts as the corporation is considered a ____________________________________.
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Chapter 12: Reporting and Analyzing Cash Flows
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Sample Questions
Q1) Required: What is the amount of dividends declared and distributed in 2013?
A)$180,350
B)$8,375
C)$61,875
D)$56,600
E)$70,250
Q2) The cash flow on total assets ratio reflects the company's actual cash flows and,therefore,is affected by the accounting constraints of recognition and measurement for net income.
A)True
B)False
Q3) A company's transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from:
A)Operating activities
B)Investing activities
C)Financing activities
D)Direct activities
E)Indirect activities
Q4) Explain how to determine cash flows from investing and financing activities.
Q5) All cash transactions eventually affect noncash ___________ accounts.
Page 14
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Chapter 13: Analyzing and Interpreting Financial Statements
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Sample Questions
Q1) What is the purpose of a good financial statement analysis report? What are the key components?
Q2) Internal users of financial information:
A)Are not directly involved in operating a company.
B)Are those individuals involved in managing and operating the company.
C)Include shareholders and lenders.
D)Include directors and customers.
E)Include suppliers,regulators and the press.
Q3) A company's sales in 2012 were $280,000 and its sales in 2013 were $341,600.Using 2012 as the base year,what is the sales trend percent for 2013?
Q4) What is the company's return on common stockholders' equity ratio for 2013?
A)27.5%
B)25.4%
C)12.6%
D)29.4%
E)19.5%
Q5) A company paid cash dividends on its preferred stock of $40,000 in the current year when its net income was $120,000 and its average common stockholders' equity was $640,000.What is the company's return on common stockholders' equity?
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Chapter 14: Applying Present and Future Values
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Sample Questions
Q1) Sandra has a savings account that is now $50,000.She started with $28,225 and earned interest at 10% compounded annually.It took five years to accumulate the $50,000.
A)True
B)False
Q2) The present value of $5,000 per year for three years at 12% compounded annually is $12,009.
A)True
B)False
Q3) A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in seven years.The fund will earn 7% interest,and the company intends to put away a series of equal year-end amounts for seven years.What amount must the company deposit annually?
Q4) _____________ is a borrower's payment to the owner of an asset for its use.
Q5) Interest is the borrower's payment to the owner of an asset for its use.
A)True
B)False
Q6) A company is setting aside $21,354 today and wishes to have $30,000 at the end of three years for a down payment on a piece of property.What interest rate must the company earn?
Page 16
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Chapter 15: Investments and International Operations
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Sample Questions
Q1) As a long-term investment,Elmer's Equipment Enterprise purchased 35% of Sticky Supplies Inc.'s 300,000 shares for $350,000 at the beginning of the fiscal year of both companies.On the purchase date,the fair value and book value of Sticky's net assets were equal.During the year,Sticky's earned net income of $430,000 and distributed cash dividends of 0.42 cents per share.The fair value of Sticky's assets at the end of the year totaled $349,450.What is Elmer's balance for this investment at the end of the year?
Q2) A company has net income of $250,000,net sales of $2,000,000,and average total assets of $1,500,000.Its return on total assets is equal to:
A)12.5%
B)13.3%
C)16.7%
D)75.0%
E)600.0%
Q3) A company reported net income of $275,000,net sales of $2,500,000,and average total assets of $2,100,000 for the current year.Calculate this company's profit margin,total asset turnover,and return on total assets.
Q4) Identify the three types of classifications for noninfluential investments in securities. To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Accounting for Partnerships
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Sample Questions
Q1) A partnership that has two classes of partners,general and limited,where the limited partners have no personal liability beyond the amounts they invest in the partnership and no active role in the partnership except as specified in the partnership agreement,is a:
A)Mutual agency partnership
B)Limited partnership
C)Limited liability partnership
D)General partnership
E)Limited liability corporation
Q2) Groh and Jackson are partners.Groh's capital balance in the partnership is $64,000 and Jackson's capital balance is $61,000.Groh and Jackson have agreed to share equally in income or loss.Groh and Jackson agree to accept Block with a 25% interest.Block will invest $35,000 in the partnership.The bonus that is granted to Block equals:
A)$5,000.
B)$2,500.
C)$6,667.
D)$3,333.
E)$0,because Block must actually grant a bonus to Groh and Jackson.
Q3) The life of a partnership is ____________________ in duration.
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Chapter 17: Accounting With Special Journals
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Sample Questions
Q1) The accounting principle that requires an accounting information system to report useful,understandable,timely,and pertinent information for effective decision-making is the:
A)Control principle
B)Compatibility principle
C)Relevance principle
D)Flexibility principle
E)Cost-benefit principle
Q2) The accounts payable ledger has a controlling account in the general ledger and a separate subsidiary account for each creditor in the accounts payable ledger.
A)True
B)False
Q3) A company had cash sales during the period.These transactions would be recorded in which of the following journals?
A)Sales journal
B)Purchases journal
C)Cash disbursements journal
D)Cash receipts journal
E)General journal.
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Page 19