Fundamentals of Managerial Accounting Final Exam Questions
Course Introduction
Fundamentals of Managerial Accounting introduces students to the essential concepts and techniques used by managers to make informed business decisions. The course focuses on the use of accounting information for planning, controlling, and evaluating operations within an organization. Key topics include cost behavior, cost-volume-profit analysis, budgeting, performance measurement, and decision-making processes. Students will learn to analyze financial data, prepare internal reports, and apply accounting methods to solve real-world managerial problems, providing a foundational understanding crucial for effective business leadership.
Recommended Textbook
Horngrens Financial and Managerial Accounting 4th Edition by Miller Nobles
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Chapter 1: Accounting and the Business Environment
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Sample Questions
Q1) Accounting is the information system that measures business activities,processes the information into reports,and communicates the results to decision makers.
A)True
B)False
Answer: True
Q2) According to the ________,the acquired assets should be recorded at the amount actually paid rather than at the estimated market value.
A)going concern assumption
B)economic entity concept
C)cost principle
D)monetary unit assumption
Answer: C
Q3) The relative proportion of economic resources and obligations would be shown by the balance sheet.
A)True
B)False
Answer: True
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Chapter 2: Recording Business Transactions
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Sample Questions
Q1) Source documents provide the evidence and data for accounting transactions.
A)True
B)False
Answer: True
Q2) For Expenses,the category of account and its normal balance is ________.
A)stockholders' equity and a credit balance
B)assets and a debit balance
C)assets and a credit balance
D)stockholders' equity and a debit balance
Answer: D
Q3) Which of the following is an asset account?
A)Cash
B)Notes Payable
C)Dividends
D)Expenses
Answer: A
Q4) The trial balance is also known as the balance sheet.
A)True
B)False
Answer: False
Page 4
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) On September 1,2014,Joy Inc.paid $8,000 in advance for an 8-month rental space covering the period of September,2014 through April,2015.The prepaid expense was initially recorded as an asset.Joy Inc.makes adjusting entries once a year at year-end.The adjusting entry on December 31,2014 would include a ________.
A)debit of $8,000 to Cash
B)credit of $8,000 to Prepaid Rent.
C)debit of $4,000 to Rent Expense
D)credit of $4,000 to Rent Expense
Answer: C
Q2) A business hired a repairman to overhaul its plumbing system.The repairman began work on September 15 and completed it on October 15.The business agreed to pay him $4,000 when the work was completed.As of September 30,the work was 50% complete and the business made an adjusting entry to accrue repair expense as of the end of September.On October 15,the work was completed and the repairman was paid in full.Provide the journal entry for the cash payment on October 15.(Ignore explanation)
Answer: 11ea84d1_1119_3f79_83dc_e14b76108342_TB3006_00
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Which of the following is the most liquid asset?
A)Building
B)Prepaid Expenses
C)Accounts Receivable
D)Cash
Q2) Which of the following entries will be necessary to close the appropriate depreciation account at the end of the year?
A)debit Accumulated Depreciation and credit Income Summary
B)debit Depreciation Expense and credit Income Summary
C)debit Income Summary and credit Accumulated Depreciation
D)debit Income Summary and credit Depreciation Expense
Q3) A balance sheet prepared in the report form,lists the assets on the left,and the liabilities and stockholders' equity on the right.
A)True
B)False
Q4) The Accounts Receivable account is a permanent account.
A)True
B)False
Q5) Provide the closing entry for the Income Summary account.
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Chapter 5: Merchandising Operations
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Sample Questions
Q1) Under a perpetual inventory system,merchandise returned by a customer to the seller is recorded as a ________ in the books of seller.
A)sales return
B)sales allowance
C)sales discount
D)purchase return
Q2) A retailer purchases goods from a manufacturer and sells them to customers.
A)True
B)False
Q3) Merchandise inventory accounting systems can be broadly categorized into two types.They are ________.
A)FIFO and LIFO
B)perpetual and periodic
C)wholesale and retail
D)manufacturer and producer
Q4) Provide journal entries to close the Income Summary account and the Dividends account.
Q5) Give journal entry to close the expense accounts and contra revenue accounts with a debit balance.
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Chapter 6: Merchandise Inventory
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Sample Questions
Q1) Which of the following is the correct formula to calculate inventory turnover?
A)Inventory turnover = Cost of goods sold ÷ Average merchandise inventory
B)Inventory turnover = Cost of goods sold × Average merchandise inventory
C)Inventory turnover = Cost of goods sold + Average merchandise inventory
D)Inventory turnover = Cost of goods sold - Average merchandise inventory
Q2) The cost of goods available for sale is equal to the ________.
A)cost of goods sold minus the ending inventory
B)sales revenue minus the cost of goods sold
C)cost of goods sold plus the ending inventory
D)ending inventory plus the sales revenues
Q3) An overstatement of ending merchandise inventory in the current period results in an understatement of cost of goods sold in the current period.
A)True
B)False
Q4) Henderson Sales sold 400 units of product to a customer on account.The selling price was $28 per unit,and the cost,according to the company's inventory records,was $14 per unit.Provide the journal entry to record the cost of goods sold.(Assume a perpetual inventory system.)
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Page 8
Chapter 7: Internal Control and Cash
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Sample Questions
Q1) If the bank reconciliation includes a bank service charge,a journal entry is required,which debits Bank Expense and credits Cash.
A)True
B)False
Q2) Which of the following describes firewall?
A)a malicious program that enters program code or destroys data without authorization
B)when two or more people cooperate together to defraud a company
C)a technique for protecting data
D)when a company defrauds its suppliers by making false claims
Q3) The difference that arises between the balance on the bank statement and the balance on the company's books because of a time lag in recording transactions is known as a permanent difference.
A)True
B)False
Q4) A system cannot be overcome or broken into if its internal controls are properly designed and structured.
A)True
B)False
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Chapter 8: Receivables
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Sample Questions
Q1) Which of the following is included in the numerator of the acid-test ratio?
A)Cash including cash equivalents,inventory,short-term investments,net current receivables
B)Accounts receivable and inventory
C)Cash including cash equivalents,short-term investments,net current receivables
D)Total current assets
Q2) Give the journal entry to record an uncollectible account receivable using the direct write-off method.
Q3) Which of the following would be included in the entry by the payee to record a dishonored note receivable?
A)a debit to Accounts Receivable
B)a debit to Interest Revenue
C)a debit to Notes Receivable
D)a credit to Interest Expense
Q4) Accounts receivable are also known as trade receivables. A)True B)False
Q5) A company will have receivables whenever it sells goods or services on credit. A)True B)False
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Chapter 9: Plant Assets, natural Resources, and Intangibles
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Sample Questions
Q1) Maple Corp.had net sales of $200,550 for the year ended December 31,2015.Its beginning and ending total assets were $75,200 and $110,500,respectively.Determine Maple's asset turnover ratio for the year ended December 31,2015.
A)0.46 times
B)2.67 times
C)1.18 times
D)2.16 times
Q2) Which of the following is true when the estimate of an asset's useful life is changed?
A)The new estimate is ignored until the last year of the asset's life.
B)The depreciation expense in the prior year is restated.
C)Prior years' financial statements must be restated.
D)The asset's remaining depreciable book value will be spread over the asset's remaining life.
Q3) Exchanges of plant assets that have commercial substance require any gain or loss on the transaction to be recognized.
A)True
B)False
Q4) Give journal entry to record the acquisition of a plant asset for cash.
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Chapter 10: Investments
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Sample Questions
Q1) Significant interest investments must be accounted for using the ________.
A)equity method
B)consolidation method
C)discounted cash flow method
D)acquisition method
Q2) Which of the following financial instruments pay dividends?
A)futures contracts
B)real estate securities
C)debt securities
D)equity securities
Q3) Equity securities are represented by a certificate,such as a stock certificate,and are commonly traded in the stock market.
A)True
B)False
Q4) A(n)________ is represented by a certificate and is commonly traded on an exchange.
A)inventory
B)intangible asset
C)interest
D)security
Page 12
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Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) Berkley's gross pay for this month is $8,750.His gross pay year-to-date,prior to this month totaled $102,500.What is the amount of FICA tax withheld from Berkley's pay for this month? (Assume an OASDI rate of 4.2%,applicable on the first $110,100 earnings,and a Medicare rate of 1.45%,applicable on all earnings.)
A)$319.20
B)$126.88
C)$446.08
D)$367.50
Q2) Steve,an employee of Panache Inc.,has gross salary for March of $5,000.The entire amount is under the OASDI limit of $110,100,and thus subject to FICA.The total amount of employee FICA tax is $565.(Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45 %.)
A)True
B)False
Q3) Which portion is classified as the long-term portion of Notes Payable at December 31,2014?
Q4) Benefits are extra compensation-items that are not paid directly to an employee.
A)True B)False
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Chapter 12: Long-Term Liabilities
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Sample Questions
Q1) The principal amount of a bond is $65,000,its stated rate is 7%,and the term of the bond is 5 years.The bond pays interest semiannually.At the time of issue,the market rate is 8%.Determine the present value of the bonds at issuance.
A)$44,265
B)$18,453
C)$62,393
D)$65,000
Q2) The current portion of notes payable must be reported on the balance sheet under current liabilities and the long-term portion under long-term liabilities.
A)True
B)False
Q3) In order to expand business,the management of Vereos Inc.decided to issue long-term notes payable for $50,000.The instrument carries interest at the rate of 12% with 10 equal yearly installments,beginning in one year.What will be the journal entry at the inception?
Q4) On January 1,2013,Davie Services issued $20,000 of 8% bonds that mature in five years.They were sold at a premium,for a total of $20,750.Provide the journal entry to issue bonds.
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Page 14
Chapter 13: Stockholders Equity
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Sample Questions
Q1) The journal entry for the purchase of treasury stock includes a credit to the Cash account.
A)True
B)False
Q2) If preferred stock is noncumulative,then the company needs to pay dividends that were passed in previous years.
A)True
B)False
Q3) Treasury stock causes the number of ________.
A)issued shares to go down
B)issued shares to exceed authorized shares
C)outstanding shares to go up
D)outstanding shares to go down
Q4) Which of the following characteristics is an advantage of the corporate form of business?
A)less degree of government regulation
B)limited liability of stockholders
C)separation of ownership and management
D)low start-up costs
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Chapter 14: The Statement of Cash Flows
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Sample Questions
Q1) Which of the following sections of the statement of cash flows is presented differently between the direct method and indirect method?
A)investing activity
B)financing activity
C)operating activity
D)non-cash activity
Q2) Martin Ceramics Company sold equipment for cash.The income statement shows a gain on sale of $920.The net book value of the asset prior to sale was $3,510.Which of the following statements describes the cash effect of the transaction?
A)negative cash flow of $4,430 for financing activities
B)negative cash flow of $2,590 for operating activities
C)positive cash flow of $4,430 from investing activities
D)positive cash flow of $2,590 from investing activities
Q3) How will the change in inventory be shown on the statement of cash flows?
A)positive cash flow under the operating activities section
B)negative cash flow under the operating activities section
C)positive cash flow under the financing activities section
D)negative cash flow under the investing activities section
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) Horizontal analysis compares each item in the income statement to the net sales amount.
A)True
B)False
Q2) Benchmarking is the comparison of a company's current year results with an earlier year's performance.
A)True
B)False
Q3) The relationship between total liabilities and total assets is known as the ________.
A)debt ratio
B)debt to equity ratio
C)current ratio
D)earnings per share
Q4) The gross profit percentage is an indicator of how well a company is positioned to pay off its short-term liabilities.
A)True
B)False
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17
Chapter 16: Introduction to Managerial Accounting
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Sample
Questions
Q1) Service companies include companies that provide health care,communication,banking,and other important benefits to society.
A)True
B)False
Q2) Which of the following would be considered a product cost for a manufacturing business?
A)salary of the sales manager
B)salary of the CEO
C)salaries of the accounting staff
D)salary of the production manager
Q3) What is the cost of goods available for sale for 2015?
A)$360,000
B)$304,300
C)$345,000
D)$330,000
Q4) What is the ending balance in the Work-in-Process Inventory account?
A)$24,650
B)$12,000
C)$49,500
D)$65,350
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Chapter 17: Job Order Costing
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Sample Questions
Q1) On January 1,2014 Feldstein Manufacturing had a beginning balance in Work-in-Process Inventory of $80,000 and a beginning balance in Finished Goods Inventory of $20,000.During the year,Feldstein incurred manufacturing costs of $350,000. Additionally,the following transactions occurred during the year:
Job A-12 was completed for a total cost of $120,000 and was sold for $125,000
Job A-13 was completed for a total cost of $200,000 and was sold for $210,000
Job A-15 was completed for a total cost $60,000 but was not sold as of year-end The Manufacturing Overhead account had an unadjusted credit balance of $12,000,and was cleared to zero at year-end.
What was the final balance in the Cost of Goods Sold account?
A)$308,000 debit balance
B)$332,000 debit balance
C)$320,000 debit balance
D)$12,000 credit balance
Q2) When direct materials are received on the production floor,they are recorded on the job cost record.
A)True
B)False
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Chapter 18: Process Costing
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Sample Questions
Q1) When indirect materials are issued to production,the Raw Materials Inventory account is credited.
A)True
B)False
Q2) A production cost report is a part of the financial statements available to the stockholders of a company.
A)True
B)False
Q3) The ________ account is credited to adjust for overallocated overhead costs.
A)Cost of Goods Sold
B)Sales Revenue
C)Manufacturing Overhead
D)Finished Goods Inventory
Q4) The equivalent units of production for direct materials and conversion costs must be the same.
A)True
B)False
Q5) Iowa Inc.purchased raw materials for $6,000 and $25,000 for cash and on account,respectively.Provide the journal entry to record purchase of raw materials.
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Chapter 19: Cost Management Systems: Activity-Based, just-In-Time, and Quality Management Systems
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Sample Questions
Q1) What is the cost of machining per ceiling fan?
A)$18
B)$180
C)$30
D)$144
Q2) Oscar Inc.,a manufacturer of gift articles,uses a single plantwide rate to allocate indirect costs.The company allocates manufacturing overhead using a single plantwide rate with machine hours as the allocation base.Estimated overhead cost for the year is $5,000,000.And estimated machine hours are 25,000.During the year,the actual machine hours used was 30,000.Calculate the predetermined overhead allocation rate.
A)$166
B)$250
C)$200
D)$150
Q3) The first step in developing an activity-based costing system is to identify the activities that will be used to assign the manufacturing overhead.
A)True
B)False
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Chapter 20: Cost-Volume-Profit Analysis
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Q1) If all other factors remain constant,an increase in fixed costs will increase the breakeven point.
A)True
B)False
Q2) Total variable costs change in direct proportion to changes in the volume of production.
A)True
B)False
Q3) One of the assumptions of cost-volume-profit (CVP)analysis is that there are no changes in the ________.
A)accounts payable
B)cash balance
C)inventory levels
D)accounts receivables
Q4) Fixed costs divided by contribution margin per unit equals breakeven point in unit sales.
A)True
B)False
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Page 22
Chapter 21: Variable Costing
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Q1) Absorption costing is more appropriate than variable costing for making decisions relating to expansion of production capacity of a plant.
A)True B)False
Q2) Contribution margin is calculated by deducting the total cost of goods sold from sales revenue.
A)True B)False
Q3) When all of the units produced are sold,the operating income will be the same under both the costing methods.(Assume no beginning inventories.)Which of the following gives the correct reason for the above statement?
A)all costs incurred have been recorded as expenses
B)a portion of the fixed manufacturing overhead is still in the Finished Goods Inventory account
C)all selling and administrative expenses have been recorded as period costs
D)fixed manufacturing costs have not been considered while calculating the operating profits
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Page 23
Chapter 22: Master Budgets
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Q1) There are no budgeted capital expenditures or financing transactions during the quarter.Based on the above data,calculate the projected cash balance at the end of June.
A)$35,700
B)$21,900
C)$46,100
D)$54,600
Q2) The amount of accumulated depreciation for the budgeted balance sheet can be obtained from ________.
A)cash budget
B)selling and administrative expenses budget and the prior balance sheet
C)cash payments for S&A expenses budget
D)financial budget
Q3) A company has prepared the operating budget and the cash budget and is now preparing the budgeted balance sheet.The balance of Accounts Payable can be taken from ________.
A)the inventory,purchases and cost of goods sold budget
B)the budgeted cash payments for purchases
C)the direct materials budget
D)the selling and administrative expenses budget
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Chapter 23: Flexible Budgets and Standard Cost Systems
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Q1) Which of the following is used to charge the cost of direct labor to the production?
A)Debit for standard quantity for actual production times standard cost per hour
B)Credit for standard quantity usage for actual production times actual cost per hour
C)Debit for actual quantity times standard cost per hour
D)Credit for standard quantity for actual production times standard cost per hour
Q2) An unfavorable variance for an expense means more expense has been incurred than planned.
A)True
B)False
Q3) An unfavorable sales volume variance in operating income suggests a(n)________.
A)increase in number of actual units sold when compared to the expected number of units sold
B)decrease in number of actual units sold when compared to the expected number of units sold
C)increase in variable expenses per unit
D)decrease in fixed costs
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25
Chapter 24: Responsibility Accounting and Performance Evaluation
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Q1) Qvoware Inc.sells cosmetic products in the United States.Which one of the following is most likely to be a cost center for Qvoware?
A)a Qvoware retail store in Dallas
B)the Qvoware HR department
C)a Qvoware kiosk at a mall for selling its products
D)the Qvoware product lines
Q2) Centralized companies split their operations into different divisions or operating units and top management delegates decision-making to the division/unit managers.
A)True
B)False
Q3) Which of the following managers is likely to have the least amount of responsibilities for a company?
A)the manager of a cost center
B)the manager of a profit center
C)the manager of an investment center
D)the manager of a transfer pricing center
Q4) The performance report of a profit center includes both revenues and expenses.
A)True
B)False
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Chapter 25: Short-Term Business Decisions
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Q1) Which of the following statements describes a scenario when management should consider dropping a business division?
A)The division has been reporting an operating loss consistently.
B)The division's avoidable fixed costs are less than its contribution margin.
C)The division's avoidable fixed costs are greater than its contribution margin.
D)The division's unavoidable fixed costs are greater than its operating loss.
Q2) A company produces 1,000 packs of chicken feed per month.The sales price is $4 per pack.Variable cost is $1.50 per unit,and fixed costs are $1,800 per month.Management is considering adding a vitamin supplement to improve the value of the product.The variable cost will go up from $1.50 to $1.90 per unit,and fixed costs will go up by 20%.The CEO wants to price the new product at a level which will bring operating income up to $1,000 per month.What price is to be charged?
A)$5.00
B)$5.06
C)$4.99
D)$4.76
Q3) Price-setters emphasize a cost-plus pricing approach.
A)True
B)False
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Page 27
Chapter 26: Capital Investment Decisions
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Q1) Which of the following situations suggests the acceptance of an investment proposal?
A)The present value of the net cash inflows exceeds the initial investment.
B)The IRR is lower than the hurdle rate.
C)The cash inflows are lesser than the initial investment.
D)The investment will have a residual value.
Q2) The payback method can only be used when the net cash inflows from a capital investment are the same for each period.
A)True
B)False
Q3) The accounting rate of return is also known as average rate of return or annual rate of return.
A)True
B)False
Q4) The payback period and accounting rate of return (ARR)methods are suitable to investments with a short time span.
A)True
B)False
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Chapter 27: Accounting Information Systems
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Q1) On July 4,a hardware manufacturing firm purchased inventory on account for $1,300.The company plans to pay $700 in the following week and the remaining amount in the week after.Which of the following is the correct entry to record this transaction in a purchases journal? Assume a perpetual inventory system is used.
A)$650 will be recorded in the Accounts Payable CR and Merchandise Inventory CR column.
B)$2,000 will be recorded in the Accounts Payable DR and Merchandise Inventory DR column.
C)$1,300 will be recorded in the Merchandise Inventory CR and Accounts Payable DR column.
D)$1,300 will be recorded in the Accounts Payable CR and Merchandise Inventory DR column.
Q2) Which of the following is a column in a purchases journal?
A)Cost of Goods Sold CR
B)Accounts Payable CR
C)Sales Revenue DR
D)Interest Revenue CR
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