Managerial Accounting Exam Review
Course Introduction
Managerial Accounting provides students with an understanding of the principles, techniques, and tools used by managers to make effective business decisions. The course covers topics such as cost behavior, budgeting, performance evaluation, and decision analysis, focusing on how accounting information supports planning, controlling, and strategic decision-making within organizations. Students will learn to analyze financial information, use it for forecasting, and apply various models to assess the financial implications of managerial choices. The emphasis is on practical application and the role of accounting data in guiding management actions in dynamic business environments.
Recommended Textbook Principles of Accounting 12th Edition by
Belverd E. Needles
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25 Chapters
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Page 2
Chapter 1: Accounting Principles and the Financial Statements
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Sample Questions
Q1) The statement of cash flows would disclose the purchase of a building for cash
A)nowhere on the statement.
B)in the operating activities section.
C)in the investing activities section.
D)in the financing activities section.
Answer: C
Q2) Responsibility for ethical financial reporting rests solely with the accountant.
A)True
B)False
Answer: False
Q3) The terms "bookkeeping" and "accounting" are not synonymous.
A)True
B)False
Answer: True
Q4) The heading for a balance sheet might include the line "For the Month Ended December 31,20--."
A)True
B)False
Answer: False
Page 3
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Chapter 2: Analyzing and Recording Business Transactions
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Sample Questions
Q1) One of the general rules of the double-entry system is that total debits must always be equal to total credits.
A)True
B)False
Answer: True
Q2) The controller for Tires and More,Inc.has recorded the following transactions during the month: the owner established the business with a $20,000 investment on the 1st of the month;the company recorded $36,000 of revenue for tires and services provided during the month;and expenses of $22,000 were recorded for the month.Additionally,on the last day of the month the owner withdrew $2,000 for personal expenses.What is the balance of Owner's Equity at the end of the month,and is the balance a debit or a credit?
A)$32,000 debit.
B)$32,000 credit.
C)$18,000 credit.
D)$36,000 debit.
Answer: B
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4
Chapter 3: Adjusting the Accounts
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Sample Questions
Q1) Revenue is equal to the cash received by a company during an accounting period.
A)True
B)False
Answer: False
Q2) Which of the following is not a condition required by the SEC for the recognition of revenue?
A)Delivery of goods or rendering of services.
B)Transfer of cash from the buyer to the seller.
C)Fixed or determinable price.
D)Existence of an arrangement.
Answer: B
Q3) Retailers often end their fiscal years .
A)during the slack season.
B)during the peak of the busy season.
C)at different times each year,depending on the tax consequences.
D)on June 30.
Answer: A
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Which account bypasses the Income Summary account in the closing process?
A)John Clair,Withdrawals
B)Jet Ski Rentals
C)Depreciation Expense-Building
D)Wages Expense
Q2) The primary objective of reversing entries is to
A)place the expenses for the current period in the proper accounts.
B)simplify the bookkeeping associated with accruals from the prior period.
C)transfer the balance of the expense accounts to the owner's Capital account and set the accounts equal to zero.
D)correct errors.
Q3) After all closing entries have been entered and posted,the balance of the Income Summary account will be zero.
A)True
B)False
Q4) The total amount of expenses for the period is
A)$200.
B)$400.
C)$900.
D)$500.
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Chapter 5: Foundations of Financial Reporting and the
Classified Balance Sheet
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Sample Questions
Q1) Only the chief financial officer and the company's CPAs must certify that,to their knowledge,the statements are accurate and complete.
A)True
B)False
Q2) Profitability means having enough cash on hand to pay bills when they become due.
A)True
B)False
Q3) Working capital is the amount by which current liabilities exceed current assets and measures how efficiently liabilities are used to produce sales.
A)True
B)False
Q4) The conventions of consistency and conservatism require that financial statements present all the information relevant to users' understanding of the statements.
A)True
B)False
Q5) State the definition of a current asset.
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Chapter 6: Accounting for Merchandising Operations
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Sample Questions
Q1) A merchandiser will earn an operating income of exactly $0 when
A)gross margin equals operating expenses.
B)net sales equals cost of goods sold.
C)cost of goods sold equals gross margin.
D)operating expenses equal net sales
Q2) A trade discount is the same as a sales discount.
A)True
B)False
Q3) Terms of "n/10 eom" mean that payment is due 10 days after the end of the month.
A)True
B)False
Q4) The change in merchandise inventory level from the beginning to the end of the year affects cost of goods sold.
A)True
B)False
Q5) An advantage of using the perpetual inventory system is that it requires less recordkeeping than the periodic inventory system.
A)True
B)False
Q6) Describe how to compute the cost of goods available for sale.
Page 8
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Chapter 7: Inventories
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Sample Questions
Q1) The LIFO method agrees with the actual physical goods flow in most businesses.
A)True
B)False
Q2) Ending merchandise inventory for LIFO will be the same dollar amount under a periodic inventory system as under a perpetual inventory system.
A)True
B)False
Q3) What is a LIFO liquidation,and what is its effect on income before income taxes?
Q4) When the average-cost method is applied to a perpetual inventory system,a moving average cost per unit is computed with each purchase.
A)True
B)False
Q5) Under the perpetual inventory system,cost of goods sold is not recorded until the end of the accounting period.
A)True
B)False
Q6) What is the chief objective of supply-chain management? How is it accomplished?
Q7) How is the matching rule applied when accounting for merchandise inventory?
Page 9
Q8) Why are cost flow assumptions made when accounting for merchandise inventory?
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Chapter 8: Cash and Internal Control
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Sample Questions
Q1) When a petty cash fund is replenished,the entry requires a debit to Petty Cash.
A)True
B)False
Q2) One example of a periodic independent verification is the bank reconciliation.
A)True
B)False
Q3) A very small company would have the most difficulty in implementing which of the following internal control activities?
A)Sound personnel procedures
B)Periodic independent verification
C)Limited access to assets
D)Separation of duties
Q4) As the controller of a large company,you notice that the Cash Short or Over account is consistently debited for fairly large sums of cash when the petty cash fund is replenished.You probably will want to
A)increase the amount of the fund.
B)decrease the amount of the fund.
C)find a new custodian for the fund.
D)offer the custodian your congratulations.
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Chapter 9: Receivables
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Sample Questions
Q1) When Company A discounts without recourse a note to Company B,Company A has a contingent liability until the note is paid.
A)True
B)False
Q2) The allowance for uncollectible accounts is necessary because
A)a liability results when a credit sale is made.
B)when recording uncollectible accounts expense,it is not possible to predict specifically which accounts will not be collected.
C)management should know how many credit losses have been sustained over the years.
D)uncollected accounts that are written off must be accumulated in a separate account.
Q3) Under the allowance method,Uncollectible Accounts Expense is not recorded when an individual customer defaults.
A)True
B)False
Q4) Securitization delays the receipt of cash from sales made on credit.
A)True
B)False
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Chapter 10: Long -Term Assets
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Sample Questions
Q1) The replacement of tires on a truck is considered an ordinary repair.
A)True
B)False
Q2) Goodwill represents the excess paid for a business over the fair value of its net assets.
A)True
B)False
Q3) When depreciation rates are revised,an adjustment for previous years' depreciation must be recorded.
A)True
B)False
Q4) Computation of a partial year's depreciation is often required for the proper determination of net income.
A)True
B)False
Q5) Which of the following would be considered a capital expenditure?
A)Business vehicle tune-up
B)Equipment maintenance
C)Installation of an air-conditioning system
D)Professional deep cleaning of display room carpet
Page 12
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Chapter 11: Current Liabilities and Fair Value Accounting
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Sample Questions
Q1) Company A's current assets = $10,000,total assets = $26,000,current liabilities = $7,000 and total liabilities = $47,000.What is Company A's working ratio?
A)$3,000
B)$21,000
C)1.43
D)0.55
Q2) A contingent liability eventually becomes either a true liability or no liability at all.
A)True
B)False
Q3) The classification of a liability as current or long-term is not important to the evaluation of a company's liquidity.
A)True
B)False
Q4) When a business sells an item and collects a state sales tax on it,a current liability to the state arises.
A)True
B)False
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Page 13
Chapter 12: Accounting for Partnerships
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Sample Questions
Q1) Juan invests $120,000 for a one-fifth interest in a partnership in which the other partners have capital totaling $240,000 before admitting Juan.After distribution of the bonus,Juan's capital is
A)$120,000
B)$72,000
C)$96,000
D)$48,000
Q2) The salary,interest,and stated ratio method of allocation can still be applied when a net loss has occurred.
A)True
B)False
Q3) If the asset accounts did not reflect their current values,the asset accounts would need to be adjusted before admitting the new partner.
A)True
B)False
Q4) Justin and Nicole are forming a partnership.What are some of the factors they should consider in deciding how income might be divided?
Q5) List four advantages and four disadvantages of the partnership form of business.
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Chapter 13: Accounting for Corporations
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Sample Questions
Q1) The value at which one share of stock can be bought or sold is called
A)book value.
B)call value.
C)par or stated value.
D)market value.
Q2) In recent years,Redbird Corporation,a small manufacturer of jet skis for the leisure industry,has followed the practice of issuing a 10 percent stock dividend annually.Although the company's net income has been almost $4 million in each of the past three years,retained earnings have declined from about $10 million to about $6 million.What is the probable motivation for management's decision to issue an annual 10 percent stock dividend? What is the most likely explanation for the decrease in retained earnings? Given your explanation,would stockholders' equity also decrease by a like amount?
Q3) The Additional Paid-in Capital account normally arises in the accounting records when
A)the number of shares issued exceeds par value.
B)the stated value of capital stock is greater than the par value.
C)the market value of the stock rises above par value.
D)capital stock is issued at an amount greater than par value.
Q4) Define outstanding stock.
Page 15
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Chapter 14: Long Term Liabilities
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Sample Questions
Q1) The carrying value of a bond issued at a premium is calculated at any given point in time by adding the balance of the unamortized premium to the bond's face value.
A)True
B)False
Q2) When bonds are sold at face value between interest dates,the result is a debit to the Cash account that
A)equals face value.
B)depends on the circumstances.
C)is less than face value.
D)exceeds face value.
Q3) If bonds are retired by an issuer by purchase on the open market at a price below the bonds' carrying value,a loss will result.
A)True
B)False
Q4) Unamortized Bond Discount is a contra-liability account.
A)True
B)False
Q5) Discuss and define financial risk,financial leverage,and negative financial leverage.
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Chapter 15: The Statement of Cash Flows
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Sample Questions
Q1) When a statement of cash flows is prepared using the indirect method, A)net income is the starting point in determining cash flows from operations.
B)cash paid for dividends is not included.
C)the increase in cash is different than when the direct method is used.
D)the amount of cash collected from customers is calculated.
Q2) Lincoln Company engaged in this transaction: Purchased treasury stock with cash. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.
A)Financing activities section.
B)Investing activities section.
C)Does not represent a cash flow.
D)Operating activities section.
Q3) Issuance of notes,either long- or short-term,would be reflected in the financing activities section of the statement of cash flows.
A)True
B)False
Q4) Cash inflows and outflows are easier to manipulate than earnings.
A)True
B)False
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Chapter 16: Financial Statement Analysis
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Sample Questions
Q1) Financial statement analysis is used to show how items in a company's financial statements relate to the company's financial performance objectives.
A)True
B)False
Q2) Asset turnover is most closely associated with a company's liquidity position.
A)True
B)False
Q3) A company is referred to as a diversified company or a conglomerate if it operates in
A)many related industries.
B)many unrelated industries.
C)many and varied locations throughout the world.
D)one single major industry.
Q4) What is the profit margin for this corporation? Round your answer to one decimal place.
A)22.5 percent
B)30.0 percent
C)40.0 percent
D)53.3 percent
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Chapter 17: Managerial Accounting and Cost Concepts
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Sample Questions
Q1) Accountants must have high professional ethics.List and briefly describe five ethical standards that management accountants subscribe to that,in your opinion,help maintain the impression that accountants are highly ethical. The student should list any five of the following ethical standards:
Q2) Job #178 consists of 500 units and has total of direct materials,$48,000;direct labor,$58,000;and overhead,$35,000.
a.What is the unit product cost?
b.What are the prime costs per unit?
c.What are the conversion costs per unit?
Q3) If a management accountant gives information about a future merger of his or her company to a relative,the accountant has acted ethically.
A)True
B)False
Q4) Which of the following is not a product cost?
A)Depreciation on office furniture
B)Manufacturing overhead
C)Direct labor
D)Direct materials
Q5) Give two examples of each stage in the management process.
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Chapter 18: Costing Systems: Job Order Costing
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Sample Questions
Q1) Service organizations use unit costs of services to determine inventory balances.
A)True
B)False
Q2) Job order cost cards for incomplete jobs make up the ending balance of the Finished Goods Inventory account.
A)True
B)False
Q3) In a job order costing system,a separate job order cost card is used for each individual job.
A)True
B)False
Q4) Disposing under- or overapplied overhead into the Cost of Goods Sold account is related to _____ in the management process.
A)performing
B)planning
C)evaluating
D)communicating
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20
Chapter 19: Costing Systems Process Costing
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Sample Questions
Q1) Process costing is a system of
A)inventory management.
B)manufacturing.
C)product costing.
D)product placement.
Q2) Which of the following in a process costing system helps in verifying the cost of ending work in process inventory for a period?
A)Materials requisitions and labor time tickets
B)Cost recap included in the statement of production
C)Cost recap included in the process cost report
D)None of the these
Q3) Managers prepare process cost reports in the evaluating stage of the management process.
A)True
B)False
Q4) When the FIFO costing method is used in process costing,the number of units in beginning inventory is multiplied by 100 percent to determine the equivalent units.
A)True
B)False
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Chapter 20: Value-Based Systems: Activity-Based Costing and Lean Accounting
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Sample Questions
Q1) A value-adding activity is one that increases the cost of a product but does not add to the product's market value.
A)True
B)False
Q2) Activity-based costing applies only to production-related activities.
A)True
B)False
Q3) Maintaining consistent high product quality
A)is both required for and a by-product of the just-in-time environment.
B)is difficult to obtain in a just-in-time environment because of the severe time constraints imposed by the just-in-time environment.
C)requires quality control inspectors at each step of the production process.
D)is too expensive to obtain in a just-in-time environment.
Q4) A bill of activities will complicate the estimation of profits of a company.
A)True
B)False
Q5) Lean's primary goal is to eliminate waste in business processes.
A)True B)False
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Chapter 21: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Last year,RC Rancho's revenue was $120,000,000,variable costs were $90,000,000 and fixed costs were $15,000,000.RC Rancho's contribution margin ratio was 25 percent.
A)True
B)False
Q2) Assuming an average fee of $1,400 per client and a targeted profit of $26,000,the number of clients to be serviced is
A)80 clients.
B)120 clients.
C)47 clients.
D)90 clients.
Q3) A product line's contribution margin represents its contribution to paying off variable costs and to generating a profit.
A)True B)False
Q4) The contribution margin equals zero at the breakeven point. A)True
B)False
Q5) Explain what cost-volume-profit analysis is and how managers use it.
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Chapter 22: The Budgeting Process
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Sample Questions
Q1) Budgets assign resources and the responsibility to use them wisely to managers who are held accountable for their results.
A)True B)False
Q2) It is necessary to know the budgeted number of unit sales to prepare production budget.
A)True B)False
Q3) Wean Corporation's budgeted balance sheet for the coming year shows total assets of $5,000,000 and total liabilities of $2,000,000.Common stock and retained earnings make up the entire stockholders' equity section of the balance sheet.Common stock remains at its beginning balance of $1,500,000.The projected net income for the year is $333,000.The company pays no dividends.What is the balance of retained earnings at the beginning of the budget period?
A)$1,067,000
B)$1,167,000
C)$1,833,000
D)$1,500,000
Q4) Describe three benefits budgeting provides to an organization's success.
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Chapter 23: Flexible Budgets and Performance Analysis
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Sample Questions
Q1) A manufacturing company's human resource department is most likely a
A)cost center.
B)discretionary cost center.
C)revenue center.
D)profit center.
Q2) It is necessary for managers to fully understand the causal relationship between their actions and the organization's overall performance to get results.
A)True
B)False
Q3) Which of the following determines a company's competitive advantage by comparing its performance with that of its closest competitors?
A)Asset turnover
B)Organization chart
C)Cost center
D)Benchmarking
Q4) Why are managers more likely to achieve their objectives in both the short term and the long term when they utilize a tool such as the balanced scorecard?
Q5) Write a brief note on the performance-based pay.
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Chapter 24: Standard Costing and Variance Analysis
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Q1) A variance is the difference between standard costs and actual costs.
A)True
B)False
Q2) Using the above information provided for Good Sleep,the total fixed overhead variance is
A)$4,500 (U).
B)$30,500 (U).
C)$5,000 (U).
D)$45,000 (U).
Q3) Using the above information provided for Good Sleep,the total overhead cost variance is
A)$4,000 (F).
B)$5,000 (U).
C)$4,500 (U).
D)$500 (F).
Q4) Standard costing can be used only with a process costing system.
A)True
B)False
Q5) "A favorable direct materials price variance is always good for a company." Is this statement true? Justify your answer.
26
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Chapter 25: Short-Run Decision Analysis and Capital Budgeting
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Q1) Capital investment analysis is a decision process for the purchase of capital facilities,such as buildings and equipment.
A)True
B)False
Q2) Using the above information for Rodriguez,the project's payback period is (Round your final answer to two decimal places. )
A)2.31 years.
B)3.20 years.
C)2.14 years.
D)2.50 years.
Q3) The most beneficial projects are the ones with the highest net present value. A)True
B)False
Q4) The acceptable proposals are ranked in order of net present value,payback period,or rate of return in capital investment decisions.
A)True
B)False
Q5) Why is the residual value of equipment relevant when considering the replacement of equipment?
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