Accounting for Managers
Mock Exam
Course Introduction
Accounting for Managers introduces the fundamental principles and practices of accounting, focusing on the use and interpretation of financial information to support effective managerial decision-making. The course covers key topics such as financial statement analysis, budgeting, cost behavior, performance evaluation, and the ethical considerations influencing accounting practices. Through practical case studies and real-world examples, students will learn how accounting data can be applied to planning, controlling, and evaluating business operations, enabling managers to make informed strategic decisions in a dynamic organizational environment.
Recommended Textbook
Financial and Managerial Accounting 9th Edition by Belverd E. Needles
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Page 2
Chapter 1: Uses of Accounting Information and the Financial Statements
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Sample Questions
Q1) Generally accepted accounting principles
A) are changing continually.
B) are sound in theory but rarely used in practice.
C) have eliminated all the weaknesses in accounting practice.
D) are accounting rules formulated by the Internal Revenue Service.
Answer: A
Q2) An increase in revenue will result in an increase in stockholders' equity.
A)True
B)False
Answer: True
Q3) A company's ability to attract and hold investment capital ultimately depends on its A) budgeting.
B) planning.
C) liquidity.
D) profitability.
Answer: D
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Chapter 2: Analyzing Business Transactions
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Sample Questions
Q1) Which of the following transactions decreases both assets and stockholders' equity?
A) Declaration and payment of a dividend
B) Advance payment made for insurance
C) Receipt of a phone bill, to be paid at a later time
D) Payment of a liability
Answer: A
Q2) Which of the following errors will not cause the debit and credit columns of a trial balance to be unequal?
A) A debit was posted to an account as a credit.
B) A journal entry was posted twice.
C) The trial balance was incorrectly summed.
D) Only part of a journal entry was posted.
Answer: B
Q3) One might see "J2" correctly placed in the Post.Ref.column of the journal.
A)True
B)False
Answer: False
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Chapter 3: Measuring Business Income
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Sample Questions
Q1) An adjusted trial balance is prepared to
A) test that the ledger is in balance after the accounts have been adjusted.
B) facilitate preparation of the adjusting entries.
C) both test that the ledger is in balance after the accounts have been adjusted and facilitate preparation of the financial statements.
D) facilitate preparation of the financial statements.
Answer: C
Q2) When a direct cause-and-effect relationship cannot be established between revenues and costs,the costs are
A) not expensed and remain as assets on the balance sheet.
B) expensed among the accounting periods that benefit from the costs.
C) expensed immediately in their entirety.
D) expensed equally each year.
Answer: B
Q3) The carrying value of equipment is the estimated dollar amount the equipment could be sold for.
A)True
B)False
Answer: False
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Page 5
Chapter 3: Supplement - Closing Entries and the Work Sheet
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Sample Questions
Q1) On the work sheet,under what circumstances will the last two columns be in balance after the initial footing?
A) When no adjustments have been entered on the work sheet
B) Under all circumstances, assuming no arithmetical errors have been made
C) Under no circumstances
D) When net income is zero
Q2) Closing entries may be prepared by referring solely to the Income Statement columns of the work sheet.
A)True
B)False
Q3) Which of the following accounts most likely would have an amount contained in the Income Statement columns of a work sheet?
A) Common Stock
B) Office Supplies
C) Dividends
D) Income Taxes Expense
Q4) The work sheet is a type of accountant's working paper.
A)True
B)False
6
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Chapter 4: Financial Reporting and Analysis
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Sample Questions
Q1) Which of the following appears on the balance sheet?
A) Interest income
B) Income taxes
C) Net sales
D) Merchandise inventory
Q2) Interest expense on a mortgage would be classified on a multistep income statement under the heading
A) general and administrative expenses.
B) selling expenses.
C) cost of goods sold.
D) other revenues and expenses.
Q3) Financial statements are important to the efficient allocation of resources in our economy.
A)True
B)False
Q4) An advantage of the single-step income statement over the multistep form is A) the amount of information it provides.
B) its simplicity.
C) its comprehensiveness.
D) its use in computing ratios.
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Chapter 5: The Operating Cycle and Merchandising Operations
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Q1) Each of the following is a feature of internal control except A) sound personnel policies.
B) recording of all transactions.
C) separation of duties.
D) television commercials to enhance marketability.
Q2) Good internal control dictates that key employees be rotated among different jobs.
A)True
B)False
Q3) A remittance advice is attached to a(n)
A) check.
B) invoice.
C) purchase order.
D) receiving report.
Q4) When a customer returns goods,the company decreases the Sales account. A)True
B)False
Q5) Bonding means insuring a company against employee theft.
A)True B)False
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Chapter 6: Inventories
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Sample Questions
Q1) Use this inventory information for the month of June to answer the following question. \(\begin{array}{llll}
\text { June } & 1 & \text { Beginning inventory } & 10 \text { units @ } \$120\\ & 5 & \text { Purchase } & 60 \text { units } @ \$ 112\\ &14 & \text { Sale } & 40 \text { units } \\ &21 & \text { Purchase } & 30 \text { units @ } \$ 116 \\ &30 & \text { Sale } & 28 \text { units } \end{array}\)
Assuming that a periodic inventory system is used,what is cost of goods sold on a LIFO basis?
A) $7,696
B) $7,736
C) $3,664
D) $3,704
Q2) Which of the following is an inventory costing method?
A) Perpetual
B) Lower-of-cost-or-market
C) Specific identification
D) Periodic
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Page 9
Chapter 7: Cash and Receivables
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Sample Questions
Q1) The fee for factoring without recourse is normally higher than it would be with recourse.
A)True B)False
Q2) Which of the following would not be a valid reason to keep some currency on hand at a place of business?
A) To pay small, unforeseen expenses
B) To make up for any imbalance in the books
C) To advance money to sales reps for travel expenses
D) To provide money for cash registers
Q3) One might infer from a debit balance in Allowance for Uncollectible Accounts that A) a posting error has been made.
B) Uncollectible Accounts Expense has been overestimated.
C) the accounts receivable aging method apparently is being used.
D) more has been written off than had been estimated.
Q4) Following a lenient credit-granting policy will probably result in fewer defaults by customers.
A)True B)False
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Chapter 8: Current Liabilities and Fair Value Accounting
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Sample Questions
Q1) Explain why the cost of employing someone is more than just the wage or salary paid to the employee.
Q2) Which of the following does not represent a liability?
A) An obligation for estimated income taxes payable
B) Interest that has accrued on a bank loan
C) An obligation to pay for goods purchased, payable one year after purchase
D) An obligation for future purchases of goods
Q3) The payables turnover is measured
A) in days.
B) as a percentage.
C) in dollars.
D) in times.
Q4) Property Taxes Expense is recorded only in the month it is paid.
A)True
B)False
Q5) Product warranties are an expense of the period in which the related product is sold.
A)True
B)False
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Chapter 9: Long Term Assets
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Sample Questions
Q1) The cost of a sewage system should be included in the Land Improvements account.
A)True
B)False
Q2) One argument in favor of accelerated depreciation is that the assets benefit is greater in the earlier years.
A)True
B)False
Q3) Land and a building on the land are purchased for $336,000.The appraised values of the land and building are $60,000 and $300,000,respectively.The cost allocated to the building should be
A) $28,000.
B) $122,000.
C) $150,000.
D) $280,000.
Q4) Speedy Printing purchased a new printing press for $80,000.It depreciates the press over a five-year period,using the double-declining-balance method of depreciation.If the press has an $8,000 estimated residual value,calculate depreciation expense for each of the five years.(Show your work.)
Q5) What is goodwill and when may it be recorded?
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Chapter 10: Long-Term Liabilities
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Q1) Failure to make interest payments on debt can force a company into bankruptcy.
A)True
B)False
Q2) Which of the following is not needed in calculating the value of a bond?
A) Face interest rate
B) Market interest rate
C) Future value of periodic interest payments
D) Present value of face (maturity) amount
Q3) If the face interest rate at the date of bond issuance exceeds the market interest rate,the bond will probably be sold at a discount.
A)True
B)False
Q4) Serial bonds are bonds that
A) mature on several different dates.
B) all have the same maturity date.
C) must be secured.
D) are also called term bonds.
Q5) Bondholders share voting rights with stockholders.
A)True
B)False
Page 13
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Chapter 11: Contributed Capital
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Q1) Which of the following would not be an account in the general ledger of a corporation?
A) Dividends Payable
B) Retained Earnings
C) Additional Paid-in Capital
D) Dividends in Arrears
Q2) The excess of the issuance price over the stated value of a no-par common stock should be credited to the
A) Common Stock account.
B) Retained Earnings account.
C) Additional Paid-in Capital.
D) Treasury Stock.
Q3) Dividends in arrears pertain to noncumulative preferred stock.
A)True
B)False
Q4) When stock is issued for noncash assets or services,how does one place a valuation (dollar amount)on the transaction?
Q5) Dividends in arrears are disclosed as liabilities of a corporation.
A)True
B)False
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Chapter 12: Investments
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Q1) When the equity method is used to account for an investment in stock,the investor will report its share of the investee's annual earnings as income regardless of how much the investee distributes in the form of dividends.
A)True
B)False
Q2) Minority interest may be found in the asset section of a consolidated balance sheet.
A)True
B)False
Q3) Which of the following entries would not require an eliminating entry when one is preparing consolidated financial statements?
A) Amount owed by subsidiary to parent
B) Investment in subsidiary
C) Amount owed by parent to subsidiary
D) Sale to customer
Q4) The account Allowance to Adjust Short-Term Investments to Market appears as a contra account on the income statement.
A)True
B)False
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Chapter 13: The Corporate Income Statement and the Statement of
Stockholders Equity
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Q1) Which of the following would have the least likelihood of being treated as an extraordinary item?
A) Uninsured loss from earthquake
B) Gain or loss on sale of equipment
C) Gain or loss arising from enactment of new law
D) Uninsured loss from fire
Q2) Indicate on the blanks below the effect (I = increase,D = decrease,NE = no effect)of a stock split on each of the items listed.
_____ 1.Assets
_____ 2.Balance of Common Stock account
_____ 3.Total contributed capital
_____ 4.Total retained earnings
_____ 5.Total stockholders' equity
_____ 6.Par value per share
_____ 7.Total number of shares outstanding
Q3) What is the basis of the statement "Accounting income is a useless measurement because it is based on so many arbitrary decisions"? Is the statement true? Explain your answer.
Q4) Why must certain income statement items be presented "net of taxes"?
Page 16
Q5) Specifically,what gives rise to the Deferred Income Taxes account?
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Chapter 14: The Statement of Cash Flows
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Sample Questions
Q1) During 2010,Heckart Corporation had sales of $250,000,net income of $25,000,average total assets of $350,000,dividend payments of $17,500,net cash flows from operating activities of $35,000,purchases of plant assets of $37,500,and sales of plant assets of $45,000.Free cash flow equals
A) $17,500.
B) $42,500.
C) $10,000.
D) $25,000.
Q2) If the indirect method is used,each of the following is a proper adjustment to net income to arrive at net cash flows from operating activities except
A) deducting a decrease in Prepaid Expenses.
B) adding an increase in Salaries Payable.
C) deducting an increase in Accounts Receivable.
D) adding a decrease in Inventory.
Q3) Even though investing activities center on the long-term assets shown on the balance sheet,they also include any short-term investments shown under current assets on the balance sheet.
A)True
B)False
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Page 17
Chapter 15: The Changing Business Environment - a Managers Perspective
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Q1) Management accounting information is more subjective than financial accounting information.
A)True
B)False
Q2) Although management accountants should try not to engage in activities that would prejudice their ability to carry out their duties,they are not obligated to refrain from such activities after business hours,as long as these activities take place off company premises.
A)True
B)False
Q3) Practitioners of management accounting and financial management have a responsibility to communicate information fairly and objectively.
A)True
B)False
Q4) A manager should write the purpose of a report before preparing it.
A)True
B)False
Q5) Give two examples of each stage in the management process.
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Q6) What steps would a company using TQM take to improve product or service quality?
Chapter 16: Cost Concepts and Cost Allocation
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Q1) Depreciation on factory equipment is a value-adding cost.
A)True
B)False
Q2) Cost allocation requires pooling of overhead costs and the selection of a cost driver.
A)True
B)False
Q3) Some period costs can be found in inventory accounts on the balance sheet.
A)True
B)False
Q4) The entry to record the application of overhead costs includes a debit to the Overhead account.
A)True
B)False
Q5) Materials costs flow from the Materials Inventory to the Work in Process Inventory to the Cost of Goods Sold account.
A)True
B)False
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Page 19
Chapter 17: Costing Systems- Job Order Costing
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Q1) In a job order costing system,when overhead costs are applied,they increase the Work in Process Inventory account.
A)True
B)False
Q2) A basic part of a job order costing system is the set of procedures and entries used to record the costs incurred for materials,labor,and overhead.
A)True
B)False
Q3) In a job order costing system,indirect labor costs incurred are charged to the Work in Process Inventory account.
A)True
B)False
Q4) Unlike a job order costing system,a process costing system is not restricted to one Work in Process Inventory account.
A)True
B)False
Q5) Explain the similarities and differences between job order costing and process costing.Focus on the characteristics of each type of system.
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Chapter 18: Costing Systems- Process Costing
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Q1) Nader,Inc.,has the following information available: \(\begin{array}{lrr}&\text { Costs from }&\text { Costs from }\\ &\text { Beginning Inventory}&\text { Curent Period }\\ \text { Direct materials } & \$ 2,300 & \$ 21,252 \\ \text { Conversion costs } & 6,200 & 150,536 \end{array}\) At the beginning of the period,there were 500 units in process that were 40 percent complete as to conversion costs and 100 percent complete as to direct materials costs.During the current period,4,300 units were started and completed.Ending inventory contained 320 units that were 80 percent complete as to conversion costs and 100 percent complete as to direct materials costs.(Assume that the company uses the FIFO costing method.)
The cost of completing a unit during the current period was A) $39.50.
B) $35.60.
C) $35.21.
D) $35.79.
Q2) In many instances,direct materials are added at the beginning of the process. A)True B)False
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Chapter 19: Value-Based Systems- Abm and Lean
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Q1) For a company offering services,which of the following is a value-adding activity?
A) Billing the clients
B) Preparing job order forms
C) Ordering, receiving, and inspecting supplies
D) Designing advertisements
Q2) Define activity-based costing.Explain why this approach to cost assignments is superior to the traditional method of using a plantwide overhead cost rate.Will activity-based costing always result in lower product costs? Defend your answer.
Q3) Under new methods of management,attempts to continuously improve the work environment come from
A) top management.
B) each department manager.
C) the board of directors.
D) everyone in the company.
Q4) A just-in-time operation seeks to eliminate all product support functions.
A)True
B)False
Q5) How can activity-based systems help managers in a global marketplace?
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Chapter 20: Cost Behavior Analysis
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Q1) Campground,Inc.,is considering the production and sale of propane lamps.Annual fixed costs associated with the project are expected to total $60,000.In addition,each lamp would sell for $12 and would require $7 in variable costs.Calculate (a)the breakeven point in units,(b)the breakeven point in dollars,(c)the number of lamps that must be sold to earn a profit of $120,000,and (d)the operating income or loss at a sales volume of 16,000 lamps.
Q2) J & C Stacy Enterprises is expecting to earn a profit of $180,000 in 20xx.The company manufactures wrought iron lamps.Each lamp requires variable costs of $13 for direct materials,$9 for direct labor,and $12 for overhead.Total variable costs are thus $34 per lamp.Fixed costs for 20xx are expected to be $630,000.Each lamp will sell for $79.
a. Determine how many lamps the company must sell to earn its targeted profit, and convert this amount to sales dollars.
b. Compute breakeven sales in dollars.
c. Explain the dollar difference between breakeven sales dollars and the sales dollars necessary to earn the targeted profit. Use the contribution margin as part of your explanation.
Q3) Is breakeven analysis a tool that can be used for a service-oriented business? Explain your answer.
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Chapter 21: The Budgeting Process
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Q1) The budgeting function begins with the preparation of the direct materials purchases budget.
A)True
B)False
Q2) Leaverton's forecast of sales is as follows: July,$60,000; August,$90,000; September,$130,000.Sales are normally 80 percent cash and 20 percent credit in any month.Credit sales are collected in full in the following month.Merchandise cost averages 60 percent of sales price.The company desires an inventory as of September 30 of $52,000.The inventory as of June 30 was $25,000. The July 31 balance of accounts receivable will be
A) $12,000.
B) $48,000.
C) $18,000.
D) $0.
Q3) The direct labor budget is needed to prepare the production budget.
A)True
B)False
Q4) Describe three benefits budgeting provides to an organization's success.
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Page 24
Chapter 22: Performance Management and Evaluation
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Q1) Using the following information,prepare a traditional income statement and a variable costing income statement: \(\begin{array}{lr}
\text { Sales } & \$ 4,000,000 \\
\text { Variable cost of goods sold } & 1,800,000 \\
\text { Variable selling expenses } & 900,000 \\
\text { Fixed selling expenses } & 100,000 \\
\text { Fixed manufacturing costs } & 600,000 \end{array}\)
Q2) The manager of Center C is responsible for the online order operations of a large retailer.What type of responsibility center is Center C?
A) Discretionary cost center
B) Profit center
C) Revenue center
D) Investment center
Q3) Cost of capital is the maximum desired rate of return on a particular investment. A)True
B)False
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Chapter 23: Standard Costing and Variance Analysis
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Q1) Keerin,Inc.,produces a complete line of women's athletic apparel.Sweatsuits are very popular in the northern states.During August,the company's records revealed the following information about the production of sweatsuits: \[\begin{array} { l l l }
\text { Standards: } & \text { Direct materials } & 5 \text { yards @\$2.50 per yard } \\ & \text { Direct labor } & 1 \text { hour @ } \$ 9.50 \text { per hour } \\ &\text { Overhead: } & \\ &\text { Variable } & \$ 5.50 \text { per direct labor hour } \\ & \text { Fixed } & 7 \text { per direct labor hour } \end{array}\]
Compute the standard unit cost for a sweatsuit.
Q2) If actual capacity used exceeds expected capacity,the fixed overhead volume variance is favorable.
A)True
B)False
Q3) The importance of direct labor standards and variances has been reduced. A)True B)False
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Chapter 24: Short Run Decision Analysis
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Q1) "Variable costs are relevant and fixed costs are irrelevant." Explain why you agree or disagree with this statement.
Q2) Many management decisions are unique and hence incompatible with strict rules,steps,or timetables.
A)True
B)False
Q3) Identify each of the following as quantitative or qualitative factors in the decision making of a tax preparation firm:
a. Timeliness ____________________
b. Number of clients _____________________
c. Competition from other firms ____________________
d. Cost of computer time _____________________
e. Service quality _____________________
Q4) Special order decisions are the decisions about whether to accept or reject special orders at prices above the normal market prices.
A)True
B)False
Q5) Why is the book value of equipment irrelevant when considering the replacement of equipment?
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Chapter 25: Capital Investment Analysis
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Q1) The proposals with the highest rank are funded first in the capital investment decisions.
A)True
B)False
Q2) Depending on the mixture of sources of capital,a company's cost of capital will vary.
A)True
B)False
Q3) Present value is the amount that must be invested today at a given rate of compound interest to produce a given future value.
A)True
B)False
Q4) Cost analysis for capital investment decisions is best accomplished by techniques that
A) discount cash flows over a project's life.
B) emphasize the liquidity of invested costs.
C) clearly distinguish different cost behavior patterns.
D) accrue, defer, and allocate costs to short time periods.
Q5) Why the residual value of equipment is relevant when considering the replacement of equipment?
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Chapter 26: Pricing Decisions,incltarget Costing and Transfer Pricing
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Q1) A company should not deviate from the traditional approaches to price determination.
A)True
B)False
Q2) Which of the following is not a step in the target costing approach to pricing?
A) Define the desired profit to be made on that product.
B) Dictate which products should not be produced.
C) Compute a target cost for the product by subtracting the desired profit from the competitive market price.
D) Identify the price at which a product will be competitive in the marketplace.
Q3) A pricing method based on product cost is
A) cost of goods sold pricing.
B) net income pricing.
C) gross margin pricing.
D) inventory pricing.
Q4) A negotiated transfer price is often used for internal pricing.
A)True
B)False
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Chapter 27: Quality Management and Measurement
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Q1) Which of the following is not an example of a conformance cost?
A) Prevention cost
B) Appraisal cost
C) Quality engineering cost
D) External failure cost
Q2) CAD is
A) a cost allocating decision.
B) computer aided downtime.
C) a computer-based engineering system.
D) an organizational environment.
Q3) A management information system can be designed to support many different types of management philosophies.
A)True
B)False
Q4) Measures of customer complaints and warranty claims are used in tracking
A) materials/scrap control performance.
B) inventory performance.
C) quality performance.
D) delivery performance.
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Chapter 28: Financial Analysis of Performance
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) Determining the percentage change in an item from one year to the next is a type of horizontal analysis.
A)True
B)False
Q2) Form 10-Q refers to the annual report filed with the SEC.
A)True
B)False
Q3) The length of the operating cycle equals the days' sales uncollected plus the A) days' payable..
B) days' inventory on hand.
C) receivable turnover
D) payables turnover.
Q4) A change in the company's auditors must be reported to the SEC within a few days of the change.
A)True
B)False
Q5) Interim financial statements report data for a period of more than one year.
A)True
B)False
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