Accounting for Managers
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Course Introduction
Accounting for Managers explores the fundamental principles and practices of accounting with a focus on their application to managerial decision-making. This course covers key concepts such as financial statement analysis, budgeting, cost behavior, performance measurement, and internal controls. Students will gain an understanding of how to interpret accounting data, use accounting information for planning and control, and make informed business decisions to efficiently manage resources. The course emphasizes practical techniques and tools that managers use to analyze financial situations and support strategic and operational objectives in various organizational settings.
Recommended Textbook
Financial and Managerial Accounting 8th Edition by John J Wild
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Page 2
Chapter 1: Accounting in Business
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Sample Questions
Q1) Which of the following is not true regarding a Certified Public Accountant?
A)Must meet education and experience requirements.
B)Must pass an examination.
C)Must exhibit ethical character.
D)May also be a Certified Management Accountant.
E)Cannot hold any certificate other than a CPA.
Answer: E
Q2) The question of when revenue should be recognized on the income statement according to GAAP is addressed by the:
A)Revenue recognition principle.
B)Going-concern assumption.
C)Objectivity principle.
D)Business entity assumption.
E)Measurement (Cost)principle.
Answer: A
Q3) The three major types of business activities are operating,financing,and investing.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Accounting for Business Transactions
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Sample Questions
Q1) ________ is the process of transferring journal entry information from the journal to the ledger.
Answer: Posting
Q2) Jennings Co.has total assets of $425 million.Its total liabilities are $110.5 million.Its equity is $314.5 million.Calculate the debt ratio.
A)38%.
B)13%.
C)34%.
D)26%.
E)14%.
Answer: D
Q3) A $15 credit to Sales was posted as a $150 credit.By what amount is the Sales account in error?
A)$150 understated.
B)$135 overstated.
C)$150 overstated.
D)$15 understated.
E)$135 understated.
Answer: B
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Page 4
Chapter 3: Adjusting Accounts for Financial Statements
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Sample Questions
Q1) A company's month-end adjusting entry for Insurance Expense is $1,000.If this entry is not made then expenses are understated by $1,000 and net income is overstated by $1,000.
A)True
B)False
Answer: True
Q2) On May 1,a two-year insurance policy was purchased for $18,000 with coverage to begin immediately.What is the amount of insurance expense that would appear on the company's income statement for the first year ended December 31?
A)$750.
B)$5,270.
C)$6,000.
D)$6,750.
E)$18,000.
Answer: C
Q3) Profit margin = ________ divided by net sales. Answer: Net Income
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Chapter 4: Accounting for Merchandising Operations
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Sample Questions
Q1) Discuss the period-end adjusting entries that are required in the new revenue recognition standards for estimating sales discounts and sales returns and allowances.
Q2) Expenses that support the overall operations of a business and include the expenses relating to accounting,human resource management,and financial management are called:
A)Cost of goods sold.
B)Selling expenses.
C)Purchasing expenses.
D)General and administrative expenses.
E)Non-operating activities.
Q3) Merchandise inventory:
A)Is a long-term asset.
B)Is a current asset.
C)Includes supplies the company will use in future periods.
D)Is classified with investments on the balance sheet.
E)Must be sold within one month.
Q4) How do closing entries for a merchandising company that uses the perpetual inventory system differ from the closing entries for a service company?
Q5) Beginning inventory plus the net cost of purchases is the ________.
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Chapter 5: Inventories and Cost of Sales
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Sample Questions
Q1) Determine the cost assigned to ending inventory using LIFO.
A)$5,440
B)$2,460
C)$2,590
D)$2,980
E)$2,860
Q2) On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements.The following information is available: Beginning inventory,January 1: $4,000
Net sales: $80,000
Net purchases: $78,000
The company's gross margin ratio is 25%.Using the gross profit method,the estimated ending inventory value would be:
A)$82,000.
B)$60,000.
C)$20,000.
D)$22,000.
E)$19,500.
Q3) The ________ ratio reflects how much inventory is available in terms of days' sales.
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Chapter 6: Cash,fraud,and Internal Controls
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Sample Questions
Q1) Define an internal control system and describe its purpose.
Q2) ________ are checks written by the depositor,deducted on the depositor's records,and sent to the payee,but not yet recorded by the bank at the bank statement date.
Q3) ________ are short-term,highly liquid investment assets that are readily convertible to a known amount of cash.
Q4) A receiving report is a document used within a company to notify the appropriate persons that ordered goods have been received and to describe the quantities and condition of the goods.
A)True
B)False
Q5) The ________ account is used to record the effects of cash overages and shortages from errors in making change or managing a petty cash fund.
Q6) The petty cash fund should be reimbursed when it is nearing zero and at the end of the accounting period when financial statements are prepared.
A)True
B)False
Q7) A ________ is a document explaining the payment of a check.
Page 8
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Chapter 7: Accounting for Receivables
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Sample Questions
Q1) The interest accrued on $7,500 at 6% for 90 days is: \(\bold{\text{(Use 360 days a year.)}}\)
A)$450.00.
B)$37.50.
C)$112.50.
D)$11.25.
E)$1,800.00.
Q2) The allowance method that assumes a given percent of a company's credit sales for the period is uncollectible is:
A)The percent of sales method.
B)The percent of accounts receivable method.
C)The aging of accounts receivable method.
D)Direct write-off method.
E)Factoring method.
Q3) What is the maturity date of a 120-day note receivable dated March 5?
Q4) Define a note receivable and explain how to calculate the interest due on a short-term note receivable.
Q5) A supplementary record created to maintain a separate account for each customer is called the ________.
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Chapter 8: Accounting for Long-Term Assets
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Sample Questions
Q1) A company traded an old forklift for a new forklift,receiving a $13,500 trade-in allowance and paying the remaining $47,200 in cash.The old forklift had cost $43,000,a 5-year useful life and a $5,000 salvage value.Straight-line accumulated depreciation of $27,200 had been recorded as of the exchange date.
1.What was the book value of the old forklift on the date of the exchange?
2.What amount of gain or loss (indicate which)should be recognized in recording the exchange,assuming the transaction has commercial substance?
3.What amount should be recorded as the cost of the new forklift?
Q2) Salvage value is:
A)Not a factor relevant to determining depletion.
B)A factor relevant to amortizing an intangible asset with an indefinite life.
C)An estimate of the asset's value at the end of its benefit period.
D)A factor relevant to determining depreciation under MACRS.
E)A factor relevant to determining an asset's useful life.
Q3) A company paid $320,000 for equipment that was expected to last five years and to have a salvage value of $40,000.During the third year of the equipment's life,$39,000 cash was paid for replacement parts that were expected to increase productivity by 10% each year.Prepare the journal entry to record the $39,000 cost incurred in the third year.
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Chapter 9: Accounting for Current Liabilities
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Sample Questions
Q1) Accrued vacation benefits are a form of estimated liability for an employer.
A)True
B)False
Q2) Estimated liabilities commonly arise from all of the following except:
A)Warranties.
B)Vacation benefits.
C)Pension benefits.
D)Employee benefits.
E)Unearned revenues.
Q3) Deposits of amounts payable to the federal government may be paid through federal depository banks.
A)True
B)False
Q4) A contingent liability is a potential obligation that depends on a future event arising from a past transaction or event.
A)True
B)False
Q5) Vacation benefits is an example of a known liability.
A)True
B)False
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Chapter 10: Accounting for Long-Term Liabilities
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Sample Questions
Q1) On January 1 of Year 1,Congo Express Airways issued $3,500,000 of 7% bonds that pay interest semiannually on January 1 and July 1.The bond issue price is $3,197,389 and the market rate of interest for similar bonds is 8%.The bond premium or discount is being amortized at a rate of $10,087 every six months. The amount of interest expense recognized by Congo Express Airways on the bond issue in Year 1 would be:
A)$132,500.
B)$225,000.
C)$265,174.
D)$245,000.
E)$224,826.
Q2) Bonds owned by investors whose names and addresses are recorded by the issuing company,and for which interest payments are made with checks or cash transfers to the bondholders,are called:
A)Callable bonds.
B)Serial bonds.
C)Registered bonds.
D)Coupon bonds.
E)Bearer bonds.
Q3) Explain the present value concept as it applies to long-term liabilities.
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Page 12
Chapter 11: Corporate Reporting and Analysis
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Sample Questions
Q1) Stockholders' equity consists of paid-in capital and retained earnings.
A)True
B)False
Q2) Large stock dividends are recorded at par or stated value.
A)True
B)False
Q3) Corporations issue preferred stock to raise capital without giving up control of the corporation and/or to boost the return earned by common shareholders.
A)True
B)False
Q4) Paid-in capital is the total amount of cash and other assets the corporation receives from its stockholders in exchange for its stock.
A)True
B)False
Q5) What is a stock split? How is a stock split different from a stock dividend?
Q6) The Paid-in Capital,Treasury Stock account can never have a debit balance. A)True B)False
Q7) Stock that has been issued and is held by stockholders is ________ stock.
Page 13
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Chapter 12: Reporting Cash Flows
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Sample Questions
Q1) Transactions that include purchasing and selling plant assets and investments in debt and equity securities.
A)Financing activities
B)Investing activities
C)Statement of cash flows
D)Indirect method
E)Direct method
F)Operating activities
Q2) A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash.The amount that should be reported as a source of cash under cash flows from investing activities is:
A)$50,000.
B)$5,000.
C)$45,000.
D)Zero.This is an operating activity.
E)Zero.This is a financing activity.
Q3) A company reported average total assets of $501,000 in Year 1 and $611,000 in Year 2.Its net operating cash flow in Year 1 was $41,500 and $55,250 in Year 2.Calculate its cash flow on total assets ratio for both years.Comment on the results.
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Page 14
Chapter 13: Analysis of Financial Statements
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Sample Questions
Q1) Dividing ending inventory by cost of goods sold and multiplying the result by 365 is the:
A)Inventory turnover ratio.
B)Profit margin.
C)Days' sales in inventory.
D)Current ratio.
E)Total asset turnover.
Q2) Explain the purpose of financial statement analysis for both external and internal users.
Q3) Compute the company's times interest earned for Year 2.
A)6.9.
B)4.8.
C)5.8.
D)14.0.
E)7.9.
Q4) The evaluation of company performance and financial condition includes evaluation of (1)past and current performance,(2)current financial position,and (3)future performance and risk.
A)True
B)False
Page 15
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Chapter 14: Managerial Accounting Concepts and Principles
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Sample Questions
Q1) A schedule of cost of goods manufactured is also known as a:
A)Raw materials processed schedule.
B)Factory supplies used schedule.
C)Manufacturing statement.
D)Total finished goods statement.
E)Cost of goods sold schedule.
Q2) Both financial and managerial accounting rely on accepted principles that are enforced through an extensive set of rules and guidelines.
A)True
B)False
Q3) Costs necessary and integral to the manufacture of finished products are ________ costs.
Q4) Define and contrast period costs and product costs.How are they reported in the financial statements of a manufacturing company?
Q5) Beginning finished goods inventory plus cost of goods manufactured equals cost of goods sold.
A)True
B)False
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Q6) ________ is the process of setting goals and making plans to achieve them.
Chapter 15: Job Order Costing and Analysis
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Sample Questions
Q1) Cosi Company uses a job order costing system and allocates its overhead on the basis of direct labor costs.Cosi expects to incur $800,000 of overhead during the next period,and expects to use 50,000 labor hours at a cost of $10.00 per hour.What is Cosi Company's predetermined overhead rate?
A)6.25%.
B)62.5%.
C)160%.
D)1600%.
E)67%.
Q2) The balance in the Work in Process Inventory at any point in time equals
A)the costs for jobs finished during the period but not yet sold.
B)the manufacturing cost of jobs ordered but not yet started into production.
C)the sum of the manufacturing costs for all jobs in process but not yet completed.
D)the manufacturing costs of all jobs started during the period,completed or not.
E)the sum of the materials,labor and overhead costs paid during the period.
Q3) Both direct and indirect labor costs are recorded on individual job cost sheets.
A)True
B)False
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Chapter 16: Process Costing and Analysis
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Sample Questions
Q1) Calculate the cost per equivalent unit of materials.
A)$2.59
B)$2.33
C)$1.89
D)$2.20
E)$2.00
Q2) The FIFO method of computing equivalent units includes the beginning inventory costs in computing the cost per equivalent unit for the current period.
A)True
B)False
Q3) Calculate the cost per equivalent unit of conversion.
A)$5.45
B)$4.50
C)$4.16
D)$4.98
E)$4.60
Q4) What is meant by equivalent units of production,and why are they important when a process costing system is used?
Q5) Describe the flow of labor in a process costing system,including accounts used.
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Chapter 17: Activity-Based Costing and Analysis
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Sample Questions
Q1) Distorted product cost information can result in poor decisions.
A)True
B)False
Q2) Unit-level costs vary with the number of units produced.
A)True
B)False
Q3) What is the approximate overhead cost per unit of Product A under activity-based costing?
A)$3.00
B)$2.00
C)$10.28
D)$15.00
E)$2.33
Q4) The more activities tracked by activity-based costing,the more accurately overhead costs are assigned.
A)True
B)False
Q5) What is the basic principle underlying activity-based costing?
Q6) ________ focuses on activities and the cost of carrying out activities.
Q7) How does ABC differ from using multiple departmental rates?
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Chapter
18: Cost Behavior and Cost-Volume-Profit Analysis
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Sample Questions
Q1) Total contribution margin in dollars divided by pretax income is the:
A)Degree of operating leverage.
B)Contribution margin ratio.
C)Margin of safety.
D)Sales mix.
E)Break-even point in units.
Q2) Mullis Corp.manufactures DVDs that sell for $5.00.Fixed costs are $28,000 and variable costs are $3.60 per unit.Mullis can buy a newer production machine that will increase fixed costs by $8,000 per year,but will decrease variable costs by $0.40 per unit.What effect would the purchase of the new machine have on Mullis' break-even point in units?
A)4,444 unit increase.
B)9,850 unit decrease.
C)5,714 unit increase.
D)4,444 unit decrease.
E)No effect.
Q3) Cost-volume-profit analysis cannot be used when a firm produces and sells more than one product.
A)True
B)False
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Chapter 19: Variable Costing and Analysis
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Sample Questions
Q1) Which of the following best describes costs assigned to the product under the variable costing method?
Direct labor (DL)
Direct materials (DM)
Variable selling and administrative (VSA)
Variable manufacturing overhead (VOH)
Fixed selling and administrative (FSA)
Fixed manufacturing overhead (FOH)
A)DL,DM,VSA,and VOH.
B)DL,DM,and VOH.
C)DL,DM,VOH,and FOH.
D)DL and DM.
E)DL,DM,FSA,and FOH.
Q2) Contribution margin is the excess of sales over total variable costs.
A)True
B)False
Q3) Information presented in a variable costing format can assist management when making short-term pricing decisions.
A)True
B)False
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Chapter 20: Master Budgets and Performance Planning
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Sample Questions
Q1) There are at least five benefits from budgeting.Identify two of these benefits: (1)________
(2)________
Q2) Webster Corporation's budgeted sales for February are $325,000.Webster pays sales representatives a commission of 6% of sales dollars.The company pays a sales manager a monthly salary of $4,400 and expects advertising expense of $2,000 per month.Compute the total budgeted selling expenses for February.
A)$19,500.
B)$6,400.
C)$23,900.
D)$25,900.
E)$21,500.
Q3) Preparing a budget should be the sole task of the most important department in an organization.
A)True
B)False
Q4) The budget process rarely coincides with the accounting period.
A)True
B)False
Q5) What is a cash budget? How can management use a cash budget?
Page 22
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Chapter 21: Flexible Budgets and Standard Costs
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Sample Questions
Q1) Compute the total direct labor cost variance.
A)$80,250 unfavorable.
B)$80,250 favorable.
C)$61,125 favorable.
D)$61,125 unfavorable.
E)$19,125 favorable.
Q2) Management by exception means that managers focus on the most significant differences between actual costs and standard costs.
A)True
B)False
Q3) The purchasing department is responsible for the price paid for materials.
A)True
B)False
Q4) What are the four steps in the effective management of variance analysis?
Q5) Define standard costs.How do they assist management?
Q6) When standard costs are used,factory overhead is assigned to products with a predetermined standard overhead rate.
A)True
B)False
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Chapter 22: Performance Measurement and Responsibility Accounting
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Q1) A company pays $15,000 per period to rent a small building that has 10,000 square feet of space.This cost is allocated to the company's three departments on the basis of the amount of the space occupied by each.Department One occupies 2,000 square feet of floor space,Department Two occupies 3,000 square feet of floor space,and Department Three occupies 5,000 square feet of floor space.If the rent is allocated based on the total square footage of the space,Department One should be charged rent expense for the period of:
A)$4,400.
B)$3,000.
C)$4,000.
D)$2,200.
E)$2,000.
Q2) A ________ helps control costs and expenses and evaluates managers' performance by assigning costs and expenses to the managers responsible for controlling them.
Q3) Profit center managers are evaluated on their ability to generate revenues in excess of costs.
A)True
B)False
Q4) Define joint costs and explain how joint costs can be allocated.
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Chapter 23: Relevant Costing for Managerial Decisions
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Q1) Gordon Corporation produced 10,000 digital watches in the current year.Variable costs are $8 per watch.Overhead assigned is $2.25 per watch.A supplier offers the watches for $9.50 each.Gordon's production manager reports the incremental overhead is $1.25 per watch.Gordon should:
A)Continue making the watches as an additional $1.50 per watch would be incurred if bought from the supplier.
B)Continue making the watches as an additional $0.25 per watch would be incurred if bought from the supplier.
C)Buy the watches as they would save $0.75 per watch.
D)Buy the watches as they would save $1.50 per watch.
E)Buy the watches as they would save $1.75 per watch.
Q2) Incremental costs are also called out-of-pocket costs.
A)True B)False
Q3) A ________ is the combination of products sold by a company.
Q4) A(n)________ requires a future outlay of cash and is relevant for current and future decision making.
Q5) Relevant costs are also known as ________.
Q6) Identify the five steps involved in managerial decision-making.
Page 25
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Chapter 24: Capital Budgeting and Investment Analysis
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Q1) What is the accounting rate of return for this machine?
A)33.3%.
B)16.7%.
C)50.0%.
D)8.3%.
E)4%.
Q2) Carmel Corporation is considering the purchase of a machine costing $36,000 with a 6-year useful life and no salvage value.Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year.In calculating the accounting rate of return,what is Carmel's average investment?
A)$6,000.
B)$7,000.
C)$18,000.
D)$21,000.
E)$36,000.
Q3) The net present value capital budgeting method considers all estimated cash flows for the project's expected life.
A)True
B)False
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Chapter 25: Time Value of Money
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Q1) Chris wants to accumulate $100,000 in 5 years.He plans on making equal semiannual deposits into an investment account that earns 12% semiannually in order to reach his goal.How much must Chris invest every six months? (PV of $1,FV of $1,PVA of $1,and FVA of $1)\(\bold{\text{(Use appropriate factor(s)from the tables provided.)}}\)
A)$24,331.19
B)$10,153.39
C)$13,586.77
D)$10,000.00
E)$7,586.79
Q2) The future value of $100 compounded semiannually for 3 years at 12% equals $140.49.(PV of $1,FV of $1,PVA of $1,and FVA of $1)\(\bold{\text{(Use appropriate factor(s)from the tables provided.)}}\)
A)True
B)False
Q3) 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?
Q4) ________ is a borrower's payment to the owner of an asset for its use.
Q5) An ________ is a series of equal payments occurring at equal intervals.
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Chapter 26: Investments
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Q1) Segmental Manufacturing owns 35% of Glesson Corp stock.Glesson pays a total of $47,000 in cash dividends for the period.Segmental's entry to record the cash dividend received from Glesson would include a:
A)Credit to Equity Method Investments for $16,450.
B)Debit to Equity Method Investments for $16,450.
C)Debit to Cash for $47,000.
D)Credit to Cash for $16,450.
E)Credit to Investment Revenue for $47,000.
Q2) Investments in trading securities are always classified as ________ and are reported as ________ on the balance sheet.
Q3) On July 1 of the current year,a company paid $200,000 to purchase 7%,10-year bonds with a par value of $200,000; interest is paid semiannually on June 30 and December 31.The company intends to hold the bonds until they mature.Prepare the journal entries to record (1)the bond purchase,(2)the receipt of the first semiannual interest payment on December 31 of the current year,and (3)the receipt of the second semiannual payment on June 30.
Q4) Explain how investors report investments in equity securities when the investor has a controlling influence over an investee.
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Chapter 27: Lean Principles and Accounting
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Sample Questions
Q1) Alvi reports ending work in process inventory of $341 and cost of goods sold of $11,315.Compute days' sales in work in process inventory.
A)10 days
B)11 days
C)15 days
D)8 days
E)17 days
Q2) If work in process inventory is $900 and cost of goods sold is $16,425,what is days' sales in work in process inventory?
A)21 days
B)6 days
C)5 days
D)20 days
E)18 days
Q3) Only manufacturers use the lean business model.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
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