Introduction to Managerial Accounting Question Bank
Course Introduction
Introduction to Managerial Accounting provides students with the fundamental concepts and techniques used by managers to make informed business decisions. The course covers key topics such as cost behavior, budgeting, performance evaluation, and internal reporting. Through real-world examples and practical exercises, students learn how managerial accounting information supports planning, controlling, and strategic decision-making processes within organizations. By the end of the course, students will understand the role of managerial accounting in achieving organizational objectives and improving operational efficiency.
Recommended Textbook
Horngren's Accounting 11th Edition by
Tracie L. Miller Nobles
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Page 2
Chapter 1: Accounting and the Business Environment
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Sample Questions
Q1) The total amount of assets a business possesses may or may not be equal to the total of liabilities and equity of the business.
A)True
B)False
Answer: False
Q2) Which of the following financial statements reports expenses in decreasing order of their amounts,by stating the largest expense first?
A)Statement of cash flows
B)Income statement
C)Statement of owner's equity
D)Balance sheet
Answer: B
Q3) Which of the following financial statements reports that total assets are equal to total liabilities plus total stockholders' equity?
A)Statement of owner's equity
B)Statement of cash flows
C)Income statement
D)Balance sheet
Answer: D
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Page 3
Chapter 2: Recording Business Transactions
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Sample Questions
Q1) Which of the following factors is assessed using the debt ratio?
A)expenses
B)revenues
C)risk
D)income Answer: C
Q2) A business paid salaries of $6,000 in cash.Record the transaction in the journal. Answer: 11ea8a42_4ef0_cd4a_8b44_8bea5956d5d5_TB5024_00
Q3) Amounts earned from delivering goods or services to customers are called
A)notes receivable
B)unearned revenues
C)equity
D)revenues
Answer: D
Q4) Source documents provide the evidence and data for accounting transactions.
A)True
B)False Answer: True
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) Accrued revenue is revenue that ________.
A)has been collected and earned
B)the business has collected in cash,but not yet earned
C)the business has earned,but not yet collected in cash
D)will be collected and earned in the future
Answer: C
Q2) Ursula Tax Planning Service has the following plant assets: Communications equipment: Cost,$6,960 with useful life of eight years;Furniture: Cost,$19,200 with useful life of 12 years;and Computer: Cost,$14,000 with useful life of four years.(Assume residual value of all the assets is zero. )Ursula's monthly depreciation expense calculated using the straight-line method is ________.(Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )
A)$291.67
B)$133.33
C)$72.50
D)$498
Answer: D
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) The current ratio measures ________.
A)a company's ability to sell its long-term assets
B)a company's ability to pay current liabilities with its total assets
C)a company's ability to pay current liabilities with current assets
D)a company's profitability during a particular period
Q2) Revenue and expense accounts are closed to the Income Summary account.
A)True
B)False
Q3) Which of the following is a current asset that is expected to be converted to cash,sold,or consumed during the next year (or the normal operating cycle,if longer)?
A)Land
B)Equipment
C)Building
D)Accounts Receivable
Q4) The smaller the current ratio,the higher the firm's ability to repay its current debts. A)True
B)False
Q5) List the steps of the accounting cycle that take place at the end of the period.
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Chapter 5: Merchandising Operations
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Sample Questions
Q1) When using the periodic inventory system,there is no need to record an adjusting entry for inventory shrinkage.
A)True
B)False
Q2) Journalize the following transaction for a merchandiser that uses the perpetual inventory system.
Sold goods for cash,$1,200 (cost $750).
Q3) Weston Jewelers uses the perpetual inventory system.On April 2,Weston sold merchandise with a cost of $5,000 for $10,000 to a customer on account with terms of 2/15,n/30.On April 4,the customer reported damaged goods,and Michelin granted a $2,000 sales allowance.On April 10,Weston received payment from the customer.Calculate the amount of net sales revenue.
A)$9,840
B)$10,000
C)$8,000
D)$7,840
Q4) List the three steps,in order of occurrence,of the operating cycle of a merchandising business.
Q5) What does the gross profit percentage measure? How is it computed?
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Chapter 6: Merchandise Inventory
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Sample Questions
Q1) Which of the following principles states that a business's financial statements must report enough information for outsiders to make knowledgeable decisions about the company?
A)conservatism
B)materiality concept
C)disclosure principle
D)consistency principle
Q2) The ending merchandise inventory for the current accounting period is overstated by $3,500.What will be the effect of this error?
A)The net income for the current accounting period will be overstated by $3,500.
B)The cost of goods sold for the current accounting period will be overstated by $3,500. C)The ending merchandise inventory for the next accounting period will be overstated by $3,500.
D)The cost of goods sold for the next accounting period will be understated by $3,500.
Q3) The ending inventory of a company was $552,000 as per the perpetual inventory records.The current replacement cost for the ending inventory is $547,000.Prepare the journal entry to adjust inventory.
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8
Chapter 7: Accounting Information Systems
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Sample Questions
Q1) The purchases journal is a special journal that ________.
A)has special columns for credits to merchandise inventory
B)is used to record all purchases of merchandise inventory
C)has a special column for debits to accounts payable
D)is used to record merchandise inventory,office supplies,and other assets purchased on account
Q2) Which of the following are debit columns in a typical cash payments journal?
A)Merchandise Inventory column and Cash column
B)Other Accounts column and Accounts Payable column
C)Merchandise Inventory column and Accounts Payable column
D)Other Accounts column and Cash column
Q3) Unlike the sales journal,entries in the cash receipts journal are posted monthly to the accounts receivable subsidiary ledger and daily to the general ledger.
A)True
B)False
Q4) In a networked system,the server stores the program and the data.
A)True
B)False
Q5) Describe the transactions recorded in the purchases journal.
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Chapter 8: Internal Control and Cash
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Sample Questions
Q1) Which of the following is an attribute of the internal control component-monitoring of controls?
A)Internal auditors monitor company controls to safeguard assets,and external auditors evaluate the controls to ensure that the accounting records are accurate.
B)Monitoring of controls is the "tone at the top" of the business.
C)Monitoring of controls is designed to ensure that the business's goals are achieved.
D)Monitoring of controls deals with identification and assessment of business risks.
Q2) Campaign Services hired a new accounting manager.He signed a contract for a new accounting information system,but his position did not specify whether he was authorized to do so or not.
In the above situation,which internal control procedure needs strengthening?
A)assignment of responsibilities
B)competent,reliable,and ethical personnel
C)separation of duties
D)documents
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10
Chapter 9: Receivables
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Sample Questions
Q1) A business that accepts payments by credit and debit cards ________.
A)is usually unable to attract more customers
B)must check each customer's credit rating
C)generally receives proceeds from credit and debit card transactions 30 - 45 days after the sale
D)almost always pays a fee to the seller to cover the processing costs
Q2) Which of the following is included in the category of other receivables?
A)interest receivable
B)accounts receivable
C)notes receivable
D)investments
Q3) The net realizable value of Accounts Receivable is calculated by subtracting Bad Debts Expense from Accounts Receivable.
A)True
B)False
Q4) When using the allowance method,Allowance for Bad Debts is debited when an account receivable is written off.
A)True
B)False
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Chapter 10: Plant Assets, natural Resources, and Intangibles
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Sample Questions
Q1) A machine that was purchased for $110,000 has accumulated depreciation of $90,000.The business exchanges the machine for a new one.The new machine has a market value of $140,000,and the business pays $110,000 cash.Assume the exchange has commercial substance.This exchange results in a ________.
A)gain of $10,000
B)gain of $5,000
C)loss of $10,000
D)loss of $20,000
Q2) Jones Corp.purchased equipment for $45,000.Total depreciation of $36,000 was recorded.On January 1,2017,Jones exchanged the equipment for new equipment,paying $56,000 cash.The market value of the new equipment is $65,000.Prepare the journal entry to record this transaction.Assume the exchange has commercial substance.
Q3) According to Generally Accepted Accounting Principles,if the fair value of goodwill decreases below its book value,an impairment loss must be recorded.
A)True
B)False
Q4) Prepare the journal entry to record the acquisition of a plant asset for $5,000 cash.
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12
Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) Which of the following is pay over and above base salary,usually paid for exceptional performance?
A)FICA
B)benefits
C)wages
D)bonuses
Q2) The journal entry for accrued interest on a note payable includes ________.
A)a debit to Interest Expense and credit to Cash
B)a debit to Interest Expense and credit to Interest Payable
C)a debit to Interest Payable and credit to Cash
D)a credit to Interest Expense and debit to Notes Payable
Q3) Federal unemployment compensation tax (FUTA)is not withheld from employees' gross earnings.
A)True
B)False
Q4) Mayfield,Inc.withholds $720 from Stephen's paycheck for federal income tax.This amount is part of the company's payroll tax expense.
A)True
B)False
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Chapter 12: Partnerships
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Sample Questions
Q1) Which of the following is true when a new partner is admitted by purchasing an existing partner's interest?
A)Only the transfer of cash from the new partner to the existing partner is recorded.
B)Admission of the new partner affects the total asset amount.
C)Admission of the new partner affects the total equity amount.
D)The only journal entry the partnership records is the transfer of partner's capital.
Q2) A ________ is a form of business organization that combines the advantages of both a partnership and a corporation.
A)limited liability company
B)limited liability partnership
C)C Corporation
D)general partnership
Q3) Before the start of the liquidation process,the books are adjusted and closed.
A)True
B)False
Q4) Neil and Paul formed a partnership.During the year,Neil and Paul withdrew $13,000 and $6,000,respectively.Provide the journal entry to close the withdrawal accounts.
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Page 14
Chapter 13: Corporations
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Sample Questions
Q1) Assume the following information for Petra Sales,Inc.:
Common Stock,$1.00 par,202,000 shares issued,180,000 shares outstanding
Paid-In Capital in Excess of Par-Common: $1,690,000
Retained Earnings: $2,490,000
Treasury Stock: 30,000 shares purchased at $13 per share
If Petra Sales purchases an additional 7,000 shares of treasury stock at $15 per share,what number of shares will be shown as issued and outstanding?
A)15 issued;180,000 outstanding
B)195,000 issued;180,000 outstanding
C)202,000 issued;173,000 outstanding
D)202,000 issued;180,000 outstanding
Q2) A company cannot report a gain or loss when buying or selling its own stock.
A)True
B)False
Q3) A small stock dividend,a large stock dividend and a stock split have no effect on total assets.
A)True
B)False
Q4) List the four basic rights of stockholders.
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Chapter 14: Long-Term Liabilities
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Sample Questions
Q1) On January 2,2017,Chabot Sales issues $10,000 in bonds for $10,900.These are 5-year bonds with a stated rate of 4%,and pay semiannual interest.Chabot Sales uses the straight-line method to amortize bond premium.Prepare the journal entry for the first interest payment on June 30,2017.
Q2) Which of the following is true of the Discount on Bonds Payable account?
A)It is added to the Bonds Payable balance and shown with long-term liabilities on the balance sheet.
B)It is subtracted from the Bonds Payable balance and shown with the current liabilities on the balance sheet.
C)It is added to the Bonds Payable balance and shown with stockholders' equity on the balance sheet.
D)It is subtracted from the Bonds Payable balance and shown with long-term liabilities on the balance sheet.
Q3) On January 1,2017,Shea Landscaping borrowed $100,000 on a 15%,10-year note with annual installment payments of $10,000 plus interest due on December 31 of each year.Prepare the journal entry for the first installment payment made on December 31,2017.
Q4) What is the difference between simple interest and compound interest?
Q5) What is the only difference between present value and future value?
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Chapter 15: Investments
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Sample Questions
Q1) Diamond Investments,Inc.purchased 40% of the common stock of Ivory Corporation on March 1,2016.Ivory Corporation reports a net income of $675,000 for the year 2017.Which of the following is true of the balance sheet on December 31,2017?
A)Total assets will remain unchanged.
B)Total liabilities will decrease.
C)Total equity will increase.
D)Cash will increase.
Q2) Under the equity method,the investor ________.
A)must debit the Long-term Investments account when a dividend is received
B)must record its share of the investee's net income
C)must use the LIFO method for tax purposes
D)debits the Revenue from Investments when the investee reports income
Q3) A ________ ownership in the investee's voting stock can significantly influence the investee's decisions.
A)10 percent
B)5 percent to 10 percent
C)15 percent to 20 percent
D)20 percent to 50 percent
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17
Chapter 16: The Statement of Cash Flows
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Sample Questions
Q1) When preparing the statement of cash flows,the amount of net cash flow from operating activities differs between the direct and indirect methods.
A)True
B)False
Q2) Allen Services purchased 20 delivery vehicles by issuing a 20-year installment note payable for $720,000.On the statement of cash flows,this transaction would be shown in the ________.
A)investing activities section
B)non-cash investing and financing activities section
C)operating activities section
D)financing activities section
Q3) When preparing the statement of cash flows using the indirect method,a loss on the sale of plant assets must be shown as a subtraction from the investing activities section.
A)True
B)False
Q4) List and discuss three ways in which the statement of cash flows helps financial statement users.
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Chapter 17: Financial Statement Analysis
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Q1) Management's discussion and analysis of financial condition and results of operations section of the annual report is the company's attempt to explain its financial statements and discuss its performance.
A)True
B)False
Q2) The acid-test ratio measures a company's ability to pay all its current liabilities if they came due immediately.
A)True
B)False
Q3) The formula for calculating the cash ratio is calculated is ________.
A)(Cash)/ Total liabilities
B)(Cash + Cash equivalents)/ Total current liabilities
C)(Cash + Cash equivalents)/ Total assets
D)(Cash equivalents)/ Total current liabilities
Q4) Benchmarking often compares a company against a key competitor or the industry average.
A)True
B)False
Q5) What is a common-size statement? Why are these statements useful?
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Chapter 18: Introduction to Managerial Accounting
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Sample Questions
Q1) Sales commissions are included in manufacturing overhead.
A)True
B)False
Q2) Which of the following represents the combined sum of direct materials and direct labor?
A)conversion costs
B)period costs
C)prime costs
D)fixed costs
Q3) For decision-making purposes,________ costs are often divided into prime costs and conversion costs.
A)fixed costs
B)product costs
C)period costs
D)sunk costs
Q4) Product costs,such as direct materials,are expensed in the period they are paid.
A)True
B)False
Q5) How does a service company calculate unit cost per service? Why do managers need to know the unit cost per service?
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Chapter 19: Job Order Costing
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Sample Questions
Q1) Patrick Manufacturing Systems uses job order costing and a perpetual inventory system.When recording the sale of a job,which account(s)is(are)credited?
Q2) Which of the following is the correct order of the four steps of tracking product costs?
A)assign accumulate allocate adjust
B)accumulate assign allocate adjust
C)adjust allocate accumulate assign
D)allocate adjust accumulate assign
Q3) What causes manufacturing overhead to be underallocated? When manufacturing overhead is underallocated,will the Manufacturing Overhead account have a debit or a credit balance?
Q4) Leonard Manufacturing Systems uses job order costing and a perpetual inventory system.When recording the sale of a job,which account(s)is(are)debited?
Q5) Oxford Manufacturing Company completed jobs that cost $48,000 to produce.In the same period, the company sold jobs for $102,000 that cost $53,000 to produce.Prepare the journal entries for the completion and sales of the jobs.All sales are on account.Omit explanations.
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Chapter 20: Process Costing
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Q1) Process costing is the most appropriate costing method for a restaurant serving specialty cuisine.
A)True
B)False
Q2) Black Hills Manufacturing has two processing departments,Department I and Department II.During the year,direct materials worth $33,000 purchased on account were assigned to Department I.At the end of the year,when the production cost report for Department I was prepared,Black Hills assigned $50,000 to the units transferred from Department I to Department II.The journal entry to record the transfer of units to Department II will ________.
A)debit Work-in-Process Inventory-Department II for $33,000 and credit Work-in-Process Inventory-Department I for $33,000
B)debit Work-in-Process Inventory-Department I for $50,000 and credit Work-in-Process Inventory-Department II for $50,000
C)debit Work-in-Process Inventory-Department I for $33,000 and credit Work-in-Process Inventory-Department II for $33,000
D)debit Work-in-Process Inventory-Department II for $50,000 and credit Work-in-Process Inventory-Department I for $50,000
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Chapter 21: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Variable cost per unit is constant throughout various relevant ranges.
A)True
B)False
Q2) Which of the following is a variable cost?
A)rent expense
B)salary of plant manager
C)direct labor costs
D)straight-line depreciation expense
Q3) When units produced exceeds units sold,how does operating income differ between variable costing and absorption costing? Explain your answer.
Q4) Managers can use CVP relationships to conduct sensitivity analysis.
A)True
B)False
Q5) The breakeven point represents the sales volume at which the company's net income is zero.
A)True
B)False
Q6) Fixed cost per unit is inversely proportional to the volume of units produced.
A)True
B)False
Page 23
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Chapter 22: Master Budgets
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Q1) Which of the following statements is true of the operating budget?
A)It is a part of the financial budget.
B)It includes the capital expenditures budget.
C)It includes the sales budget.
D)Its final component is the cash budget.
Q2) The budgeted production of Taurus,Inc.is 14,000 units per month.Each unit requires 40 minutes of direct labor to complete.The direct labor rate is $90 per hour.Calculate the budgeted cost of direct labor for the month.(Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar. )
A)$840,000
B)$373,333
C)$1,260,000
D)$31,500
Q3) Purchases equals cost of goods sold plus beginning merchandise inventory minus ending merchandise inventory.
A)True
B)False
Q4) What is a common method of accessing short-term financing?
Q5) What is the cornerstone of the master budget for a merchandising company? Why?
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Chapter 23: Flexible Budgets and Standard Cost Systems
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Q1) Accurate Tax Returns budgets two direct labor hours for every tax return that it prepares,at a standard cost of $34 an hour.During the most recent year,540 returns were completed with the labor cost totaling $26,000.The actual labor cost was $48.15 per hour during that period.The actual number of labor hours was 1,000.What is the direct labor cost variance?
A)$7,640 F
B)$34,000 U
C)$14,150 U
D)$34,000 F
Q2) In a standard cost system,the standard overhead allocation rate replaces the predetermined overhead allocation rate but the concept is the same.
A)True
B)False
Q3) The fixed overhead volume variance always reveals underallocated fixed overhead costs.
A)True
B)False
Q4) What does the fixed overhead cost variance measure?
Q5) List the direct materials variances,and briefly describe each.
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Chapter 24: Cost Allocation and Responsibility Accounting
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Q1) A furniture manufacturer has decided that its use of a single plantwide predetermined overhead allocation rate is no longer accurate.In making the transition to using multiple predetermined overhead allocation rates,which of the following statements is incorrect?
A)In selecting machine usage as the primary cost driver for the Production Department,management feels that there is a direct relationship between the number of machine hours used and the amount of overhead costs incurred.
B)Management must analyze the expected overhead costs and separate them into a cost pool for each department.
C)The allocation process changes because there are now multiple cost pools and multiple allocation bases.
D)The use of multiple predetermined overhead allocation rates is more complex,but it may be more accurate.
Q2) The manager of a cost center is responsible for controlling costs and generating revenues for the company.
A)True
B)False
Q3) List and briefly discuss the two limitations of financial performance measures.
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Chapter 25: Short-Term Business Decisions
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Q1) Malmo Avionics makes aircraft instrumentation.Its basic navigation radio requires $60 in variable costs and $5,000 per month in fixed costs.Further processing the radio,to enhance its functionality,will require an additional $28 per unit of variable costs,plus an increase in fixed costs of $290 per month.The marketing manager believes that they would be able to increase the sales price of the radio from $290 to $310.Malmo sells 45 radios per month.If Malmo decides to further process the radio,monthly operating income would ________.
A)increase by $900
B)increase by $4,250
C)decrease by $650
D)decrease by $4,250
Q2) A company is planning to replace an old machine with a new one.Which of the following is a sunk cost?
A)cost of the new machine
B)sales price of the old machine
C)future maintenance costs of the old machine
D)original cost of the old machine
Q3) List three questions managers should consider when deciding whether to drop a product or a business segment.
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Chapter 26: Capital Investment Decisions
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Q1) Cash flows used in net present value and internal rate of return analyses ignore ________.
A)future increased sales
B)future cost savings
C)depreciation expense
D)residual value
Q2) When comparing several investments with the same initial cost,the decision should be made on the basis of the ________.
A)highest total cash inflows
B)longest payback period
C)highest NPV
D)highest ARR
Q3) The accounting rate of return shows the effect of the investment on the company's accrual-based income.
A)True
B)False
Q4) An annuity is a series of unequal payments over equal intervals.
A)True
B)False
Q5) What are the strengths of the net present value capital budgeting method?
Page 28
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