Managerial Accounting Exam Questions
Course Introduction
Managerial Accounting focuses on the use of accounting information by managers within organizations to inform decision-making, planning, and control. This course covers key concepts such as cost behavior, cost-volume-profit analysis, budgeting, performance evaluation, and relevant costing for decision-making. Students will learn how to analyze financial data, prepare reports, and utilize accounting tools to support strategic goals and improve operational efficiency. Real-world case studies and practical exercises enable students to apply managerial accounting techniques to various business scenarios, enhancing their ability to make informed managerial decisions.
Recommended Textbook
Horngren's Accounting 11th Edition by
Tracie L. Miller Nobles
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Chapter 1: Accounting and the Business Environment
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Q1) Which of the following transactions will affect the balance of Owner's Equity?
A)received cash in advance for services to be provided later
B)paid rent expense for the month
C)purchased land for cash
D)collection on account
Answer: B
Q2) Lorna Smith decided to start her own CPA practice as a professional corporation,Smith CPA PC.Her corporation purchased an office building for $35,000 that her real estate agent said was worth $50,000 in the current market.The corporation recorded the building as a $50,000 asset because Lorna believes that is the real value of the building.Which of the following concepts or principles of accounting is being violated?
A)cost principle
B)economic entity assumption
C)monetary unit assumption
D)going concern assumption
Answer: A
Q3) What is the calculation for return on assets (ROA)? What does ROA measure?
Answer: Return on Assets = Net income / Average total assets.
ROA measures how profitably a company uses its assets.
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Chapter 2: Recording Business Transactions
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Sample Questions
Q1) Which of the following is an asset account?
A)Wages Payable
B)Notes Payable
C)Unearned Revenue
D)Accounts Receivable Answer: D
Q2) A T-account is a summary device with credits posted on the left side of the vertical line.
A)True
B)False Answer: False
Q3) Revenues and contributions of the owner in the business increase equity.
A)True
B)False Answer: True
Q4) A trial balance summarizes the ledger by listing all the accounts with their balances at a point in time.
A)True
B)False Answer: True
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Chapter 3: The Adjusting Process
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Q1) In the case of deferred revenue,the adjusting entry at the end of the period includes a credit to Service Revenue.Assume the deferred revenue is initially recorded as a liability.
A)True
B)False
Answer: True
Q2) The accountant of Zeus Legal Services failed to make an adjusting entry for supplies that had been used for the year.Assume the supplies were initially recorded as an asset.Which of the following statements is true?
A)The total liabilities will be overstated.
B)The equity will be understated.
C)The total assets will be overstated.
D)The total assets will be understated.
Answer: C
Q3) Adjusting entries are needed to correctly measure the ________.
A)ending balance in the Cash account
B)net income (loss)on the balance sheet
C)net income (loss)on the income statement
D)beginning balance in the Cash account
Answer: C
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Chapter 4: Completing the Accounting Cycle
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Q1) At the beginning of the year,the total owner's equity of Alpha Technologies was $90,000.The revenues and expenses were $80,000 and $40,000,respectively.The owner did not make and contributions or withdrawals during the year.The total owner's equity at the end of the year will amount to $120,000.
A)True
B)False
Q2) Which of the following accounts would appear in the balance sheet credit column?
A)Prepaid Insurance
B)Buildings
C)Unearned Revenue
D)Service Revenue
Q3) Which of the following accounts will have an ending balance after the closing process is completed?
A)Owner,Withdrawals
B)Rent Expense
C)Accumulated Depreciation
D)Service Revenue
Q4) Prepaid Rent is always classified as a long-term asset.
A)True
B)False
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Chapter 5: Merchandising Operations
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Q1) Delivery expense is a(n)________.
A)administrative expense
B)part of Cost of Goods Sold
C)operating expense
D)overhead expense
Q2) Which of the following is subtracted from net sales revenue to arrive at gross profit on a multi-step income statement?
A)cost of goods available for sale
B)cost of goods sold
C)sales discounts and sales returns and allowances
D)operating expenses
Q3) Best Value Company started its operations on January 1,2017.It engages in buying and selling different types of electronic gadgets.The first step in its operating cycle would be to ________.
A)collect cash from customers
B)sell goods to customers
C)purchase inventory from vendors
D)record the sales in accounts
Q4) What does the gross profit percentage measure? How is it computed?
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Chapter 6: Merchandise Inventory
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Q1) A company is uncertain whether a complex transaction should be recorded as an asset or an expense.Under the conservatism principle,it should choose to treat it as an asset.
A)True
B)False
Q2) South Meadows,Inc.sold 500 units of inventory at $25 per unit on account.The company uses the perpetual inventory system.The cost of the units sold was $10 per unit.Provide the journal entries to record the sale.
Q3) The specific identification method of inventory costing is recommended when a business deals in unique and high-priced inventory items.
A)True
B)False
Q4) When a company uses the perpetual inventory method,which of the following would be the entry to adjust inventory to lower-of-cost-or-market?
A)debit Loss on Inventory and credit Merchandise Inventory
B)debit Merchandise Inventory and credit Inventory Adjustment
C)debit Cost of Goods Sold and credit Merchandise Inventory
D)debit Merchandise Inventory and credit Cost of Goods Sold
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Chapter 7: Accounting Information Systems
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Q1) Examples of source documents in an accounting information system include the statement of cash flows and sales journal.
A)True
B)False
Q2) An accounting information system is said to be relevant,if it ________.
A)works smoothly with the business's employees and organizational structure
B)safeguards a business's assets and reduces the likelihood of fraud and errors
C)provides information that will improve decision making and reduce uncertainty
D)accommodates changes in the business over time
Q3) Which of the following is an example of a source document in a computerized accounting information system?
A)purchase invoices
B)balance sheet
C)cash payments journal
D)income statement
Q4) Entries from the purchases journal are posted monthly to the accounts payable subsidiary ledger and daily to the general ledger.
A)True
B)False
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Chapter 8: Internal Control and Cash
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Q1) When calculating the cash ratio,the numerator includes cash equivalents.
A)True
B)False
Q2) Under the Sarbanes-Oxley Act,accounting firms are allowed to audit a public company and provide certain consulting services for the same client.
A)True
B)False
Q3) A deposit ticket is a document that instructs a bank to pay the designated person a specified amount of money.
A)True
B)False
Q4) Petty cash is a fund containing a small amount of cash that is used to pay for minor expenditures.
A)True
B)False
Q5) A petty cash fund was established with a $300 balance.It currently has cash of $73 and petty cash tickets totaling $222 for travel expense.Provide the journal entry to record the replenishment of the fund.
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Chapter 9: Receivables
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Sample Questions
Q1) Which of the following is true of the acid-test ratio?
A)It measures a company's ability to pay its current liabilities.
B)It measures the ability of the company to earn net income.
C)It measures a company's ability to meet its short-term obligations with cash and cash equivalents.
D)It indicates how much cash could be realized by selling the inventory.
Q2) What is net realizable value? How is net realizable value affected when a receivable is written off under the allowance method?
Q3) The credit department must have access to cash in order to exercise effective internal control over receivables.
A)True
B)False
Q4) Days' sales in receivables measures ________.
A)how many days it takes to order and receive inventory
B)how many days it takes to collect the average level of accounts receivable
C)how many days it takes to sell inventory
D)the number of times a company collects the average accounts receivable balance in one year
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Chapter 10: Plant Assets, natural Resources, and Intangibles
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Sample Questions
Q1) Which of the following is an asset that represents distinctive identifications of a product or service?
A)license
B)copyright
C)franchise
D)trademark
Q2) Westland,Inc.owns a delivery truck.Which of the following costs,associated with the truck,will be treated as a revenue expenditure?
A)oil change and lubrication
B)major engine overhaul
C)modification for new use
D)addition to storage capacity
Q3) A lump-sum purchase or basket purchase involves paying a single price for several assets as a group.
A)True
B)False
Q4) The units-of-production method is used to compute depletion expense.
A)True
B)False
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Chapter 11: Current Liabilities and Payroll
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Q1) Which of the following taxes has a ceiling on the amount of annual earnings subject to tax?
A)FICA-OASDI taxes
B)sales tax
C)federal income tax
D)FICA-Medicare taxes
Q2) If the likelihood of a future event is remote,how should the company report the contingency?
Q3) Jupiter Services sells service plans for commercial computer maintenance.The price for each service plan is $1,650 per year,paid in advance.On October 1,2017,a service plan was sold to a new customer for cash.Prepare the journal entry to record this transaction.
Q4) The journal entry to record the employer's payroll tax expense will include a debit to Employee Income Taxes Payable.
A)True
B)False
Q5) FICA tax is a tax that is paid both by the employer and the employee.
A)True
B)False
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Chapter 12: Partnerships
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Q1) Which of the following is an advantage of a limited liability company compared to a partnership?
A)Unlike a partnership,the members of a limited liability company cannot participate actively in management of the business.
B)Unlike a partnership,the members of a limited liability company are not personally liable for the business's debts.
C)Unlike a partnership,the members of a limited liability company are taxed at the business level and are double-taxed.
D)Unlike a partnership,the members of a limited liability company do not need to file articles of organization with the state.
Q2) Which of the following is a characteristic of a partnership?
A)Partnerships pay corporate income taxes.
B)Partnerships are listed on a stock exchange.
C)Partnerships are organized as corporations.
D)Partners have co-ownership of the partnership's assets.
Q3) A written partnership agreement is also known as the articles of partnership.
A)True B)False
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Chapter 13: Corporations
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Q1) Saturn Corporation has 19,000 shares of 10%,$76 par noncumulative preferred stock outstanding and 24,000 shares of no-par common stock outstanding.At the end of the current year,the corporation declares a dividend of $184,000.How is the dividend allocated between preferred and common stockholders?
A)The dividend is allocated $6,230 to preferred stockholders and $102,698 to common stockholders.
B)The dividend is allocated $144,400 to preferred stockholders and $39,600 to common stockholders.
C)The dividend is allocated $81,302 to preferred stockholders and $102,698 to common stockholders.
D)The dividend is allocated $182,400 to preferred stockholders and $1,600 to common stockholders.
Q2) On December 1,2017,Galahad,Inc.had 200,000 shares of $1 par value common stock issued and outstanding.The next day Galahad declared and distributed a 50% stock dividend.The market value of the stock on December 2,2017 was $9 per share.Prepare the journal entry for the transaction.
Q3) Thomas Business Supply reported a negative amount in Retained Earnings.What term describes this negative amount? What can cause this to happen?
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Chapter 14: Long-Term Liabilities
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Q1) The future value is the bond's market price.
A)True
B)False
Q2) Which of the following statements is true of a bond that is issued at a premium?
A)The bond will be issued at an amount above face value.
B)The stated interest rate is lower than the prevailing market interest rate.
C)At maturity,the bond will repay an amount that is greater than the face value.
D)The bond will be issued at par.
Q3) If bonds with a face value of $206,000 are issued at 106,the amount of cash proceeds is ________.
A)$218,254
B)$206,000
C)$194,340
D)$218,360
Q4) Debt is a less expensive source of capital than stock.
A)True
B)False
Q5) When a bond is matured,the carrying value always equals the face value.
A)True
B)False
Page 16
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Chapter 15: Investments
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Q1) Aurum Services,Inc.acquired 100,000 shares of Gamma Metals,Inc.on January 1,2017.Gamma pays a cash dividend of $0.25 per share on March 2,2017.With the current investment,Aurum Services,Inc.holds 8% of Gamma.In the journal entry on March 2,2017,________.
A)Long-term Investments-Available-for-Sale is credited
B)Dividend Revenue is credited
C)Long-term Investments-Held-to-Maturity is debited
D)Long-term Investments-Available-for-Sale is debited
Q2) Complete the following statement:
When a company invests in equity securities with 20% to 50% ownership in the investee's _______ stock,the investor can ________ ________ the investee's decisions.These types of investments must be accounted for using the ________ method.
Q3) A subsidiary company is a company that ________.
A)is controlled by another corporation
B)owns a controlling interest in another company
C)is the first to begin operations in an industry
D)has a trading investment in another company
Q4) List and briefly describe the method used to account for investments in equity securities with 50% or more ownership.
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Chapter 16: The Statement of Cash Flows
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Q1) Issuing preferred stock to stockholders in exchange for cash is shown under the financing activities section of the statement of cash flows.
A)True B)False
Q2) The direct method of reporting cash flows from operating activities provides clearer information about the sources and uses of cash than does the indirect method.
A)True B)False
Q3) A debtor of Adams Company owes $500,000 but does not have enough cash to repay the debt.Following lengthy negotiations,the parties agreed that the debtor will issue 200,000 shares of common stock to settle the debt.This transaction will be reported in the investing activities section of the statement of cash flows for Adams Company.
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) To accurately determine the financial performance of a company,it is necessary to compare performance ________.
A)with a competing company
B)to the budget
C)with companies in different industries
D)only with profitable companies
Q2) The auditor's report ________.
A)attests that the financial statements are error-free
B)is prepared by the internal auditors
C)states whether the financial statements are presented in accordance with GAAP D)does not include an assessment of the effectiveness of the company's internal controls
Q3) Benchmarking is the comparison of a company's current year results with a previous year's performance.
A)True
B)False
Q4) Newbury Office Supply reported the following gross profit percentages: 2014: 37.5%;2015: 36.2%;2016: 20.8%.The industry average is 35%.What are some possible reasons for the decline in 2016?
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Chapter 18: Introduction to Managerial Accounting
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Q1) Which of the following describes a system in which suppliers deliver materials at the time they are needed and finished units are completed when customer orders need to be filled?
A)Supply Chain Management (SCM)
B)Just-in-Time (JIT)Management
C)Enterprise Resource Planning (ERP)
D)Total Quality Management (TQM)
Q2) Financial statements prepared for investors and creditors often include forward-looking information because they make decisions based on a company's future prospects.
A)True
B)False
Q3) Manufacturing overhead includes indirect manufacturing costs,such as insurance and depreciation on the factory building.
A)True
B)False
Q4) Define direct cost.
Q5) List the three kinds of inventory accounts that are used by manufacturing companies.Briefly discuss what each account includes.
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Chapter 19: Job Order Costing
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Q1) The journal entry for adjustment of underallocated manufacturing overhead includes a ________.
A)credit to Finished Goods Inventory
B)credit to Manufacturing Overhead
C)debit to Work-in-Process Inventory
D)credit to Cost of Goods Sold
Q2) Midtown,Inc.uses a predetermined overhead allocation rate of $68 per direct labor hour.In January,the company completed Job A23 which utilized 24 direct labor hours.Which of the following correctly describes the journal entry to allocate overhead to the job?
A)debit Finished Goods Inventory $1,632 and credit Manufacturing Overhead $1,632
B)debit Manufacturing Overhead $68 and credit Work-in-Process Inventory $68
C)debit Work-in-Process Inventory $1,632 and credit Manufacturing Overhead $1,632
D)debit Cost of Goods Sold $68 and credit Finished Goods Inventory $68
Q3) Accounting firms,building contractors,and healthcare providers use process costing. A)True B)False
Q4) Why would the manager of a service company need to use job order costing?
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Chapter 20: Process Costing
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Q1) The beginning inventory costs and the product costs of the current period are combined to determine the average cost of equivalent units of production under the
A)equivalent units method
B)conversion costs method
C)first-in,first-out method
D)weighted-average method
Q2) The cost of units sold is recorded by debiting Cost of Goods Sold and crediting
A)Finished Goods Inventory
B)Sales Revenue
C)Work-in-Process Inventory
D)Wages Payable
Q3) Which of the following best describes the term equivalent units?
A)partially completed units expressed in terms of fully completed units
B)partially completed units of output that will be sold as is
C)substitute of units that are partially completed
D)different types of units that have same selling price
Q4) What does the concept of equivalent units of production allow businesses to measure?
22
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Chapter 21: Cost-Volume-Profit Analysis
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Q1) When the total variable costs are deducted from total mixed costs,we obtain
A)mixed cost per unit
B)variable cost per unit
C)total high-low costs
D)total fixed costs
Q2) If variable costs go down,and all other factors remain the same,the margin of safety will become larger.
A)True
B)False
Q3) Herrera Company's Model A generator sells for $569 and Model B sells for $499.The variable cost of Model A is $514 and of Model B is $416.If Herrera Company's sales incentives reward sales of the goods with the highest contribution margin,the sales force will be motivated to push sales of Model A more aggressively than Model B.
A)True
B)False
Q4) When units produced is less than units sold,how does operating income differ between variable costing and absorption costing? Explain your answer.
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Chapter 22: Master Budgets
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Q1) What is the final step in the master budget process?
Q2) Purchases of direct material for May were $114,000,while expected purchases for June and July are $121,000 and $140,000,respectively.All purchases are paid 75% in the month of purchase and 25% the following month.Calculate the budgeted payments for the month of June.
A)$119,250
B)$115,750
C)$121,000
D)$30,250
Q3) After comparing budgets with the actual results,the feedback allows managers to determine what,if any,corrective action should be taken.
A)True
B)False
Q4) What is the cornerstone of the master budget for a merchandising company? Why?
Q5) Use of advanced technology makes it more cost effective for managers to conduct sensitivity analysis.
A)True
B)False
Q6) List the three sections of the cash budget.
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Chapter 23: Flexible Budgets and Standard Cost Systems
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Q1) Cavalaris Products uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Cavalaris had an unfavorable cost variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?
A)The actual number of direct labor hours was lower than the budgeted hours.
B)The actual variable overhead costs were higher than the budgeted costs.
C)The actual variable overhead costs were lower than the budgeted costs.
D)The actual number of direct labor hours was higher than the budgeted hours.
Q2) The sales volume variance is a result of the difference between the actual sales price and the budgeted sales price.
A)True
B)False
Q3) Allen Company manufactures staplers.The budgeted sales price is $12.00 per stapler,the variable costs are $2.00 per stapler,and budgeted fixed costs are $12,000.What is the budgeted operating income for 5,000 staplers?
A)$50,000
B)$38,000
C)$60,000
D)$10,000
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Chapter 24: Cost Allocation and Responsibility Accounting
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Q1) To evaluate the financial performance of an investment center,a business needs key performance indicators that measure ________.
A)manufacturing efficiency and product defect rate
B)operating income and the use of the center's assets
C)customer satisfaction and market share
D)generation of sales revenues and control of operating expenses
Q2) Which of the following affects the company's ability to make on-time deliveries?
A)return on investment
B)product's price
C)warranty claims
D)production cycle time
Q3) List the primary goals of performance evaluation systems.
Q4) In a decentralized company,all the planning and controlling decisions are made by top management.
A)True
B)False
Q5) Communicating top management's expectations to segment managers improves goal congruence.
A)True
B)False
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Chapter 25: Short-Term Business Decisions
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Q1) Route Two Tire Company makes a special kind of racing tire.Variable costs are $200 per unit,and fixed costs are $30,000 per month.Route Two sells 500 units per month at a sales price of $300.The company believes that it can increase the price if the tire quality is upgraded.If so,the variable cost will increase to $240 per unit,and the fixed costs will rise by 25%.The CEO wishes to increase the company's operating income by 30%.Which sales price level would give the desired results? (Round your answer to the nearest cent. )
A)$1,020.00 per unit
B)$260.00 per unit
C)$340.00 per unit
D)$367.00 per unit
Q2) Carlos Naturals manufactures bulk quantities of cleaning fluids.The company currently sells 900 containers a month at a sales price of $26 per unit.The addition of a new disinfectant will result in a sales price of $28 per unit for the improved product.It would cost a total of $4,200 per month to make the alteration.Operating income would
A)decline by $23,400
B)increase by $4,200
C)increase by $2,400
D)decline by $2,400
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Chapter 26: Capital Investment Decisions
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Q1) All else being equal,the shorter the investment period,the higher the total amount of interest earned.
A)True
B)False
Q2) Which of the following describes the time value of money?
A)The time value of money has no effect on the timing of capital investments.
B)Money loses its purchasing power over time through inflation.
C)The fact that invested cash may not earn interest over time is called the time value of money.
D)A dollar received today is worth more than a dollar to be received in the future.
Q3) The net present value method of evaluating capital investments suggests that an investment with net cash inflows which exceed the initial cost of the investment is desirable.
A)True
B)False
Q4) An operational asset used for a long period of time is known as a capital asset.
A)True
B)False
Q5) What are the strengths of the net present value capital budgeting method?
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