Managerial Accounting Exam Questions
Course Introduction
Managerial Accounting focuses on the internal use of accounting information by managers within organizations to make informed business decisions. The course covers key concepts such as cost behavior, budgeting, variance analysis, performance measurement, and decision-making techniques. Students learn how to analyze financial data for planning, controlling operations, and evaluating the financial implications of managerial strategies. Emphasis is placed on understanding how accounting data supports management in setting goals, optimizing resources, and improving organizational efficiency and profitability.
Recommended Textbook
Horngrens Financial and Managerial Accounting 4th Edition by Miller Nobles
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Page 2
Chapter 1: Accounting and the Business Environment
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Sample Questions
Q1) Which of the following financial statements reports that total assets are equal to total liabilities plus total stockholders' equity?
A)statement of retained earnings
B)statement of cash flows
C)income statement
D)balance sheet
Answer: D
Q2) Which of the following organizations requires publicly owned companies to be audited by independent accountants (CPAs)?
A)Securities and Exchange Commission (SEC)
B)Public Company Accounting Oversight Board (PCAOB)
C)Financial Accounting Standards Board (FASB)
D)American Institute of Certified Public Accountants (AICPA)
Answer: A
Q3) The guidelines for accounting information are called Generally Accepted Accounting Principles (GAAP).
A)True
B)False
Answer: True
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Page 3
Chapter 2: Recording Business Transactions
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Sample Questions
Q1) Debit refers to the right side of the T-account and credit refers to the left side.
A)True
B)False
Answer: False
Q2) Which of the following is an asset account?
A)Salaries Expense
B)Accounts Payable
C)Service Revenue
D)Prepaid Expense
Answer: D
Q3) A journal entry for a $250 payment to purchase office supplies was erroneously recorded as a debit to Office Supplies for $520 and a credit to Cash for $250.Which of the following statements correctly states the effect of the error on the trial balance?
A)The sum of the credits will exceed the sum of the debits by $270.
B)The sum of the debits will exceed the sum of the credits by $250.
C)The sum of the debits will exceed the sum of the credits by $270.
D)The sum of the debits will exceed the sum of the credits by $520.
Answer: C
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4
Chapter 3: The Adjusting Process
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Sample Questions
Q1) Which of the following accounting terms assumes that a business's activities can be divided into small segments and financial statements can be prepared for specific periods,such as a month,quarter,or year?
A)adjusting entry concept
B)revenue recognition principle
C)matching principle
D)time period concept
Answer: D
Q2) An adjusted trial balance does not list the revenues and expenses of a business.
A)True
B)False
Answer: False
Q3) A contra account's normal balance (debit or credit)is the opposite of the normal balance of the related account.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) GAAP requires publicly traded companies to prepare a post-closing trial balance and publish it in their annual report.
A)True
B)False
Q2) The steps of the accounting cycle are followed throughout the accounting period.
A)True
B)False
Q3) The financial statement that reports assets,liabilities,and stockholders' equity as of the last day of the period is called the ________.
A)income statement
B)statement of retained earnings
C)balance sheet
D)unadjusted trial balance
Q4) Property,plant,and equipment are categorized as ________.
A)current assets
B)fixed assets
C)long-term investments
D)short-term investments
Q5) Provide the closing entry for Service Revenue.
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Chapter 5: Merchandising Operations
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Sample Questions
Q1) On a multi-step income statement,the operating expenses are subtracted from ________ to arrive at operating income.
A)net sales
B)cost of goods sold
C)net profit
D)gross profit
Q2) On November 1,2015,Paramount Inc.sold merchandise for $10,000,FOB destination,with payment terms of 3/10,n/40.Sales returns on this sale amounted to $3,000.The company received payment for the balance on November 10,2015.The cost of goods sold was $3,600.Calculate the amount of gross profit from these transactions.
A)$1,800
B)$3,190
C)$1,320
D)$6,790
Q3) When a company uses a perpetual inventory system,all merchandise transactions are updated as and when they occur.As a result,the inventory account will show the current balance at all times.
A)True
B)False
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Page 7
Chapter 6: Merchandise Inventory
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Sample Questions
Q1) Which of the following values is considered the market value when valuing inventory at lower-of-cost-or-market?
A)sales price less the company's normal mark-up percentage
B)current replacement cost
C)cost plus the company's normal mark-up percentage
D)historic cost
Q2) Henderson Sales purchased $6,000 of inventory on account.Provide the journal entry.(Assume a perpetual inventory system.)
Q3) Pluto Inc.purchased 500 units of inventory at $25 per unit by payment of cash.Provide the journal entry to record the purchase of inventory.(Assume a perpetual inventory system.)
Q4) Which of the following inventory valuation methods minimizes income tax payment during a period of rising inventory costs?
A)first-in,first-out
B)last-in,first-out
C)weighted-average
D)specific identification
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Chapter 7: Internal Control and Cash
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Sample Questions
Q1) A check was written by a business for $507,but was recorded in the cash payments journal as $705.How would this error be included on the bank reconciliation?
A)a deduction on the bank side
B)an addition on the book side
C)an addition on the bank side
D)a deduction on the book side
Q2) Cadmia 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
Q3) Regarding controls over cash receipts by mail,the bank deposit slip should be compared to the remittance advices by the accounting department.
A)True
B)False
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9
Chapter 8: Receivables
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Sample Questions
Q1) A company issues a 60-day,12% note for $15,000.What is the principal amount of the note?
A)$16,800
B)$15,000
C)$14,700
D)$15,300
Q2) Martin Sales provides the following information: Net credit sales: $750,000
Beginning net accounts receivable: $40,000
Ending net accounts receivable: $20,000
Calculate the accounts receivable turnover ratio.(Round to the nearest whole number.)
A)24 times
B)25 times
C)27 times
D)22 times
Q3) Accounts receivable are also known as trade receivables.
A)True
B)False
Q4) Give the journal entry to record an uncollectible account receivable using the direct write-off method.
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Chapter 9: Plant Assets, natural Resources, and Intangibles
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Sample Questions
Q1) Nobells Corp.has acquired land and paid an amount of $500 as brokerage to acquire the land.However,the company's accountant has recorded the $500 as a revenue expenditure.What is the effect of this error?
A)net income is understated by $500
B)liabilities are overstated by $500
C)revenue is overstated by $500
D)assets are overstated by $500
Q2) In 2015,a corporation purchased a small business for $250,000.The market value of the small business's assets was $400,000,and the market value of the liabilities was $200,000.The corporation recorded goodwill of $50,000 at the time of acquisition.At the end of 2016,it measured the goodwill and found it had a remaining fair value of only $20,000.At year-end 2016,the corporation will ________.
A)record a loss on sale of assets
B)record an impairment loss
C)record accumulated depletion
D)record a gain in goodwill
Q3) Capitalizing the cost of an asset involves crediting the asset account.
A)True
B)False
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Page 11
Chapter 10: Investments
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Sample Questions
Q1) Which of the following is true of available-for-sale (AFS)investments?
A)They are always reported as current assets in the balance sheet.
B)They are always reported as long-term assets in the balance sheet.
C)They are reported as current assets on the balance sheet only if the business expects to sell them within the first two years.
D)They are reported as long-term assets on the balance sheet only if they are planned to be held for longer than a year.
Q2) The unrealized holding gains and losses on available-for-sale investments are reported on the income statement.
A)True
B)False
Q3) When a firm collects the face value of a long-term investment in bonds at maturity,________.
A)both assets and equity of the firm remains unchanged
B)both assets and liabilities of the firm increase
C)both assets and equity of the firm increase
D)liabilities decrease and equity increases
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Page 12
Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) Saran Digital Inc.starts the year with $2,500 in its Estimated Warranty Payable account.During the year,there were $210,000 of sales and $4,500 of warranty repair payments.Saran Digital estimates warranty expense at 2% of sales.At the end of the year,what is the balance in the Estimated Warranty Payable account?
A)$4,200 debit
B)$4,500 credit
C)$2,500 debit
D)$2,200 credit
Q2) Isabelle's gross pay for the week is $850.Her deduction for federal income tax is based on a rate of 19%.She has voluntary deductions of $135.Her yearly pay is under the limit for OASDI.What is her net pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)
A)$553.50
B)$688.50
C)$640.47
D)$505.47
Q3) The times-interest-earned ratio is also called the short interest ratio.
A)True
B)False
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Page 13
Chapter 12: Long-Term Liabilities
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Sample Questions
Q1) On December 31,2015,Lopez Sales has a Bonds Payable Balance of $71,000 and a Premium on Bonds Payable of $3,900.On the balance sheet,how will this information be shown?
A)$71,000 less Premium of $3,900 for a Net Balance of $67,100
B)$71,000 less one-tenth of $3,900 for a net balance of $70,610
C)$71,000
D)$71,000 plus a premium of $3,900 for a net balance of $74,900
Q2) Issuance of a note by the issuer is recorded by crediting the Cash account and debiting the Note Receivable account.
A)True
B)False
Q3) The balance in the Bonds Payable account is a credit of $65,500.The balance in the Discount on Bonds Payable account is a debit of $2,150.How much is the bond's carrying amount?
A)$2,150
B)$67,650
C)$65,500
D)$63,350
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Chapter 13: Stockholders Equity
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Sample Questions
Q1) Which of the following is a reason for a company to announce a stock split?
A)to defend against a hostile takeover
B)to double the par value of the share
C)to reduce the market price at which the stock is trading
D)to provide the shareholders with something of value,when the company cannot afford a cash dividend
Q2) A company originally issued 10,000 shares of $5 par value common stock at $7 per share.The board of directors declares a 10% stock dividend when the market price of the stock is $8 a share.Which of the following is included in the entry to record the declaration of a stock dividend?
A)Retained Earnings is debited for $8,000.
B)Retained Earnings is credited for $8,000.
C)Retained Earnings is debited for $7,000.
D)Paid-In Capital in Excess of Par-Common is credited for $7,000.
Q3) Which of the following occurs when a previously declared dividend is paid?
A)assets increase
B)stockholders' equity increases
C)liabilities decrease
D)assets remain unchanged
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Page 15
Chapter 14: The Statement of Cash Flows
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Sample Questions
Q1) 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
Q2) The change in Accrued Liabilities will be shown as a negative cash flow in the adjustments to Net Income.
A)True
B)False
Q3) Which of the following sections of the statement of cash flows includes purchases and sales of long-term assets?
A)the financing section
B)the operating section
C)the investing section
D)the non-cash investing and financing section
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16
Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) The study of percentage changes in comparative financial statements is called horizontal analysis.
A)True
B)False
Q2) The income statement is also known as the ________.
A)statement of operations
B)statement of cash flows
C)statement of stockholders' equity
D)statement of financial position
Q3) A corporation has 2,000 shares,10% preferred stock of $50 par,and 6,000 shares of common stock outstanding.The net income for the year is $250,000.Calculate earnings per share.
A)$50
B)$40
C)$42
D)$125
Q4) In a vertical analysis of the balance sheet,each line item is shown as a percentage of shareholders' equity.
A)True
B)False
Page 17
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Chapter 16: Introduction to Managerial Accounting
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Sample Questions
Q1) If Royal Inc.purchases each unit of product X for $100 and can sell it in the market for $135; the selling price of the product for Royal would be $100.
A)True
B)False
Q2) Merchandising companies,like service companies,do not have a Cost of Goods Sold account.
A)True
B)False
Q3) An enterprise resource planning system (ERP)________.
A)is a cost management system in which a company produces products just in time to satisfy needs
B)requires the implementation of total quality management
C)integrates all worldwide functions,departments and data of a company into a single system
D)cannot be implemented in service companies
Q4) Indirect materials costs such as lubes and cleaning fluids are product costs.
A)True
B)False
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Chapter 17: Job Order Costing
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Sample Questions
Q1) Unlike manufacturing companies,service companies use an allocation base for allocating both direct and indirect costs.
A)True
B)False
Q2) Which of the following describes the allocation base for allocating manufacturing overhead costs?
A)the primary cost driver of indirect manufacturing costs
B)the estimated base amount of manufacturing overhead costs in a year
C)the percentage used to allocate direct labor to Work in Process
D)the main element that causes direct costs
Q3) Manufacturing overhead costs are allocated to the Work-in-Process Inventory account by a debit to the Manufacturing Overhead account.
A)True
B)False
Q4) What was the balance in Finished Goods Inventory at year-end?
A)$90,500
B)$19,500
C)$42,500
D)$45,000
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Chapter 18: Process Costing
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Sample Questions
Q1) The Polishing Department of Laminates Inc.had 15,000 units in process on June 1 and received 25,000 units from the Machining Department.What is the number of units to account for by the Polishing Department for June?
A)25,000 units
B)15,000 units
C)40,000 units
D)10,000 units
Q2) During January,the Mixing Department incurred $60,000 in direct materials costs and $230,000 in conversion costs.At the end of the month,the ending inventory in the Mixing Department was 60% complete with respect to conversion costs.First,calculate the equivalent units,then calculate the cost per equivalent unit,and then calculate the total cost of the product that was completed and transferred out during January. The total cost of product transferred out was ________.
A)$304,347
B)$280,000
C)$243,478
D)$248,000
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Page 20
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Sample Questions
Q1) Direct material costs and direct labor costs cannot be easily traced to products.Therefore,they are allocated to products.
A)True
B)False
Q2) Which of the following temporary accounts is typically used in just-in-time management systems to accumulate direct labor and manufacturing overhead costs?
A)Adjustments account
B)Conversion Costs account
C)Manufacturing Overhead account
D)Work-in-Process account
Q3) J-Time Inc.is planning to launch a new brand of watches for kids.Similar watches are available in the market for $50.In order to penetrate the market,the company plans to use target pricing and desires a 20% net profit markup on total cost.Calculate the target cost.
A)$60.00
B)$30.75
C)$41.67
D)$40.20
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Chapter 20: Cost-Volume-Profit Analysis
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Sample Questions
Q1) When the variable cost per unit increases,the contribution margin on each unit decreases.
A)True
B)False
Q2) When the total fixed costs increases,the breakeven point ________.
A)increases
B)decreases
C)decreases proportionately
D)remains the same
Q3) Which of the following statements is true of the behavior of total fixed costs,within the relevant range?
A)They will remain the same as production levels change.
B)They will increase as production decreases.
C)They will decrease as production decreases.
D)They will decrease as production increases.
Q4) Fixed cost per unit is assumed to be constant within a particular relevant range of activity.
A)True B)False
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Chapter 21: Variable Costing
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Q1) When production is more than sales,the operating income will be higher under absorption costing than variable costing.Assume zero 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 ending 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
Q2) What is the contribution margin ratio of Beta?
A)20%
B)10%
C)25%
D)15%
Q3) The level of inventory on hand at the end of the year does not affect the amount of operating income calculated under variable costing and absorption costing.
A)True
B)False
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23
Chapter 22: Master Budgets
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Sample Questions
Q1) How much will the company have to borrow at the end of July?
A)$0
B)$5,000
C)$15,000
D)$10,000
Q2) Purchases for May were $100,000,while expected purchases for June and July are $110,000 and $125,000,respectively.All purchases are paid 25% in the month of purchase and 75% the following month.Calculate the budgeted payments for the month of June.
A)$102,500
B)$107,500
C)$110,000
D)$121,250
Q3) Which of the following is an example of the benchmarking function of a budget?
A)A budget demands integrated input from different business units and functions.
B)Budgeting requires close cooperation between accountants and operational personnel.
C)Budget figures are used to evaluate the performance of managers.
D)The budget outlines a specific course of action for the coming period.
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Chapter 23: Flexible Budgets and Standard Cost Systems
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Q1) Which of the following would be a correct interpretation of the sales volume variance for variable expenses?
A)decrease in price per unit
B)increase in variable cost per unit
C)increase in sales volume
D)increase in fixed costs
Q2) The production of a company was experiencing a high defect rate on the assembly line,which was slowing down the production and causing wastage of valuable materials.The production manager decided to purchase a higher grade of material that would be more reliable,but he was worried that the cost of the new material might negatively affect operating income.This situation would have produced a(n)________.
A)favorable direct materials cost variance
B)unfavorable direct labor cost variance
C)unfavorable direct labor efficiency variance
D)favorable direct materials efficiency variance
Q3) Favorable variances have credit balances.They are contra-expenses and therefore decrease the expense Cost of Goods Sold.
A)True
B)False
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Page 25
Chapter 24: Responsibility Accounting and Performance Evaluation
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Q1) WAX-D Inc.has a division that manufactures a component that sells for $150 and has a variable cost of $45.Another division of the company wants to purchase the component.Fixed cost per unit of component is $25.What is the maximum transfer price if the division is operating below its capacity?
A)$70
B)$170
C)$150
D)$30
Q2) Residual income is used as a key performance indicator for evaluating an investment center's financial performance.
A)True
B)False
Q3) The payroll department of a manufacturing company is most likely to be a(n)________.
A)cost center
B)revenue center
C)investment center
D)profit center
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Chapter 25: Short-Term Business Decisions
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Q1) Custom Furniture manufactures a small table and a large table.The small table sells for $900,has variable costs of $560 per table,and takes ten direct labor hours to manufacture.The large table sells for $1,500,has variable costs of $980,and takes eight direct labor hours to manufacture.The company has a maximum of 5,000 direct labor hours per month when operating at full capacity.If there are no constraints on sales of either of the products,and the company could choose any proportions of product mix that they wanted,the maximum contribution margin that the company could earn will be
A)$250,000
B)$425,000
C)$330,000
D)$325,000
Q2) Lit Furniture manufactures a small table and a large table.The small table sells for $900,has variable costs of $750 per table,and takes 7.5 labor hours to manufacture.The large table sells for $1,500,has variable costs of $900,and takes 15 direct labor hours to manufacture.The small table has a lower contribution margin per unit,but a higher contribution margin per direct labor hour.
A)True
B)False
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Chapter 26: Capital Investment Decisions
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Sample Questions
Q1) A major criticism of the payback method is that it focuses only on time to recover the investment and ignores profitability.
A)True
B)False
Q2) At the internal rate of return (IRR),the present value of cash inflows will be equal to the ________.
A)initial investment
B)residual value
C)average operating income
D)profit from the project
Q3) Zane Set Designs Company has received an award which entitles it to receive annual payments of $10,000 for the next 10 years.Which of the following is to be referred to in order to calculate the total value of the award today?
A)Present Value of $1
B)Present Value of an Annuity of $1
C)Future Value of $1
D)Future Value of an Annuity of $1
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Chapter 27: Accounting Information Systems
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Q1) Which of the following is true of outputs in an accounting information system?
A)In a manual system,reports and financial statements must be created using Word documents,Excel spreadsheets,or PowerPoint.
B)In a computerized system,the software can generate reports instantaneously that can never be manipulated.
C)Examples of outputs in an accounting information system include purchase invoices,bank checks,and sales invoices.
D)Since the output in an accounting information system are audited and error-free,it provides the evidence and data for accounting transactions.
Q2) In a perpetual inventory system,the credit columns of a typical cash payments journal are ________.
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) A source document provides the evidence and data for accounting transactions. A)True B)False
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