Managerial Accounting Final Exam
Course Introduction
Managerial Accounting focuses on the use of accounting information by managers within organizations to inform business decisions, plan operations, and control activities. The course covers key topics such as cost behavior and allocation, budgeting, performance evaluation, and decision-making processes related to pricing, product mix, and capital investment. Emphasis is placed on interpreting financial data, applying analytical tools, and integrating accounting insights into strategic planning and organizational management. Students will develop skills to analyze case studies and solve practical problems, preparing them to support effective management through informed financial analysis.
Recommended Textbook
Horngrens Financial and Managerial Accounting The Managerial Chapters 5th Edition by Miller
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Chapter 1: Accounting and the Business Environment
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Q1) Mutual agency of the owners is not present in a corporation as it is in a partnership.
A)True
B)False
Answer: True
Q2) Since cost is a reliable measure,the cost principle holds that the accounting records should continue reporting an asset at its historical cost over its useful life.
A)True
B)False
Answer: True
Q3) The statement of retained earnings informs users about how much of the earnings were kept and reinvested in the company.
A)True
B)False
Answer: True
Q4) Managerial accounting focuses on information for external decision makers.
A)True
B)False
Answer: False
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Chapter 2: Recording Business Transactions
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Q1) The T-account is a summary device that is shaped like a capital T with debits posted on the right side of the vertical line and credits posted on the left side of the vertical line.
A)True
B)False
Answer: False
Q2) Beetles,Inc.recorded the following journal entry on March 2,2016. \[\begin{array} { | l
| r | r | }
\hline \text { Cash } & 4,500 & \\
\hline \text { Unearned Revenue } & & 4,500 \\
\hline
\end{array}\] From the journal entry above,identify the transaction on March 2,2016.
A)Beetles purchased goods worth $4,500 and signed a one-year note for the same.
B)Beetles sold goods for $4,500 cash.
C)Beetles received $4,500 for services to be performed in a later period.
D)Beetles paid $4,500 for services to be received at a later date.
Answer: C
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Chapter 3: The Adjusting Process
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Q1) The Brighton Dental Corporation prepays the rent on its dental office.On July 1,the corporation paid $18,000 for 6 months of rent.How much Rent Expense should Brighton Dental Corporation record the three months ended September 30 under the accrual basis? Why?
Answer: Brighton Dental should report Rent Expense of $9,000 because expense is recorded when incurred.
Q2) Hank's Tax Planning Service started business in January 2016.The company rented an office for $7,000 per month starting from January 1,2016.On that day,Hank prepaid the rent through June 30.The company makes adjusting entries at the end of each month.What is the balance in the Prepaid Rent account as of April 30,2016?
A)$14,000
B)$1,167
C)$7,000
D)$3,500
Answer: A
Q3) Deferred expenses are also called prepaid expenses.
A)True
B)False
Answer: True
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Chapter 4: Completing the Accounting Cycle
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Q1) 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
Q2) The adjusting process zeroes out all revenue accounts and all expense accounts.
A)True
B)False
Q3) Which of the following accounts will have an ending balance after the closing process is completed?
A)Dividends
B)Rent Expense
C)Accumulated Depreciation
D)Service Revenue
Q4) The current ratio is calculated using the values from the income statement.
A)True
B)False
Q5) List the steps of the accounting cycle that take place during the period.
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Chapter 5: Merchandising Operations
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Q1) A sales allowance is recorded with a credit to Accounts Payable.
A)True
B)False
Q2) Briefly discuss what gross profit represents and how it affects the net earnings of a merchandiser.
Q3) When a periodic inventory system is used,________.
A)an adjusting entry is needed to record the ending Merchandise Inventory account balance
B)the process for closing the Income Summary and Dividends accounts differs from the process used in the perpetual inventory system
C)beginning Inventory,Purchases,and Freight In accounts are closed via the Income Summary Account
D)there is no need to take a physical count of inventory
Q4) Under the perpetual inventory system,when a wholesaler returns the goods purchased on account,the ________ account is credited.
A)Accounts Receivable
B)Merchandise Inventory
C)Cost of Goods Sold
D)Accounts Payable
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Chapter 6: Merchandise Inventory
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Q1) The ending merchandise inventory for the current year is overstated by $28,000.What effect will this error have on the following year's net income?
A)The net income will be overstated by $56,000.
B)The net income will be overstated by $28,000.
C)The net income will be understated by $28,000.
D)The net income will be understated by $56,000.
Q2) Universal,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. )
Q3) Ending inventory equals the cost of goods available for sale less beginning inventory.
A)True
B)False
Q4) Which of the following inventory costing methods is based on the actual cost of each particular unit of inventory?
A)specific identification
B)weighted-average
C)last-in,first-out
D)first-in,first-out
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Chapter 7: Internal Control and Cash
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Q1) As proof of the deposit transaction,a customer receives a cancelled check from the bank.
A)True
B)False
Q2) Prepare the journal entries for the following petty cash transactions of Allen Coffee Shop.
\(\begin{array}{|l|l|}
\hline\text { Sept. 10 }&\text { Established a petty cash fund with a } \$ 300 \text { balance. } \\
\hline \\
&\text { The petty cash fund has } \$ 105 \text { in cash and } \$ 200 \text { in petty } \\ &\text { cash tickets there were issued to pay for Delivery Expense } \\
&\$115 \text { ) and Postage Expense ( } \$ 85 \text { ). Replenished the fund } \\ \text { Sept. } 31&\text { and recorded the expenditures. }\\
\hline \text { Oct. } 1 5&\text { Decreased the balance of the petty cash fund to } \$ 250 \\\hline \end{array}\)
Q3) Journalize the adjusting entry for the third reconciling item: NSF check.
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Chapter 8: Receivables
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Q1) The two methods of accounting for uncollectible receivables are ________.
A)the direct write-off method and the liability method
B)the asset method and the sales method
C)the allowance method and the liability method
D)the allowance method and the direct write-off method
Q2) An organization's receivables can be categorized into accounts receivable,notes receivable,and other receivables.
A)True
B)False
Q3) Which of the following is included in the category of other receivables?
A)interest receivable
B)accounts receivable
C)notes receivable
D)investments
Q4) Factoring is an option available to a business to reduce the risk of uncollectible accounts receivable.
A)True
B)False
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Chapter 9: Plant Assets, natural Resources, and Intangibles
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Q1) Depreciation is the allocation of a plant asset's cost to expense over its useful life.
A)True
B)False
Q2) Equipment was purchased for $24,000 on January 1,2016.The equipment's estimated useful life was five years,and its residual value was $4,000.The straight-line method of depreciation was used.Calculate the gain or loss on sale if the equipment is sold for $18,000 on December 31,2016,the end of the accounting period.Prepare the journal entry to record the sale of equipment.
Q3) Exchanges of plant assets that have commercial substance require any gain or loss on the transaction to be recognized.
A)True
B)False
Q4) The process by which businesses allocate a natural resource's cost over its usage is known as depreciation.
A)True
B)False
Q5) Prepare the journal entry to record the acquisition of a plant asset for $5,000 cash.
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Chapter 10: Investments
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Q1) A(n)________ is an example of equity securities.
A)preferred stock
B)municipal bond
C)corporate bond
D)Treasury bill
Q2) Which of the following is the major difference between the accounting for equity securities and debt securities?
A)Debt securities are classified as liabilities,while equity securities are classified as assets.
B)Debt securities are classified as trading investments,while equity securities are classified as held-to-maturity investments.
C)Debt securities earn interest revenue,while equity securities earn dividend revenue.
D)Debt securities of all types have a maturity date,while only a few equity securities have a maturity date.
Q3) Short-term investments are investments in debt and equity securities that are highly illiquid.
A)True
B)False
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Chapter 11: Current Liabilities and Payroll
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Q1) On July 1,2017,Ferrero,Inc.purchased merchandise inventory for $350,000 by signing a note payable.The note is for 6 months and bears interest at a rate of 8%.Prepare the journal entry for this transaction,using a perpetual inventory system.
Q2) Since a company usually does not know the amount of the year-end bonus at year-end,the company estimates the amount of the bonus based on a percentage. A)True
B)False
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) Which of the following is true of a contingent liability?
A)It is a potential liability that depends on a future event.
B)It is an actual liability that is difficult to estimate.
C)It is an actual liability that depends on a past event.
D)It is a liability resulting from a lawsuit settled in court.
Q5) If the likelihood of a future event is probable and the amounts of the expense can be estimated,how should the company report the contingency?
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Chapter 12: Long-Term Liabilities
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Q1) When bonds are retired at maturity,assuming the last interest payment has already been recorded,the journal entry includes a debit to the Bonds Payable account and a credit to the Cash account.
A)True
B)False
Q2) Get Out of Town Vacations signed a 14%,10-year note for $157,000.The company paid an installment of $2,100 for the first month.What portion of the first monthly payment is interest expense? (Round your answer to the nearest whole number. )
A)$268
B)$35,063
C)$15,183
D)$1,832
Q3) If a bond's stated interest rate is lower than the market rate,which of the following is true?
A)The bond will be issued at a premium.
B)The bond will be issued at par.
C)The bond will be issued at a discount.
D)The bond will be issued for an amount higher than the maturity value.
Q4) What is the difference between simple interest and compound interest?
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Chapter 13: Stockholders Equity
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Q1) Supermart,Inc.completed the following treasury stock transactions in 2016: Mar. 3 Rurchased 1,BO0 shares of the company's \(\$ 3\) par value common stock as treasury stock, paying cash of \(\$ 10\) per share.
Mar. 17 Sold 400 shares of the treasury stock for cash of \(\$ 12\) per share. Mar. 25 Sold 600 shares of the treasury stock for cash of \(\$ 7\) per share. (Assume the balance in Paid-In Capital from Treasury Stock Transactions on March 24 is $ 1,200. )
Journalize these transactions.Explanations are not required. How will Supermart,Inc.report treasury stock on its balance sheet as of December 31,2016?
Q2) Stockholders of a corporation are not personally liable for the corporation's debt. A)True B)False
Q3) The journal entry for the purchase of treasury stock includes a credit to Cash. A)True B)False
Q4) Rimsone,Inc.purchases 8,500 shares of the company's own $6 par common stock for $8 per share.Journalize the transaction.
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Chapter 14: The Statement of Cash Flows
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Q1) In practice,most companies face complex situations.In these cases,a spreadsheet can help in preparing the statement of cash flows.
A)True
B)False
Q2) Arturo Sales purchased some equipment for $12,000 by issuing a six-month note payable.This will appear in the non-cash investing and financing activities section of the statement of cash flows.
A)True
B)False
Q3) Martin Ceramics Company sold equipment for cash.The income statement shows a gain on the sale of $1,020.The net book value of the asset was $3,810.Which of the following statements describes the cash effect of the transaction?
A)negative cash flow of $4,830 for financing activities
B)negative cash flow of $2,790 for operating activities
C)positive cash flow of $4,830 from investing activities
D)positive cash flow of $2,790 from investing activities
Q4) The direct method restates the income statements in terms of cash.
A)True
B)False
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Chapter 15: Financial Statement Analysis
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Q1) Investors and creditors cannot evaluate a company by examining only one year's data.
A)True
B)False
Q2) A common-size statement reports the same percentages that appear in a vertical analysis.
A)True
B)False
Q3) 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
Q4) Annual reports ________.
A)are required to be prepared by every corporation
B)discuss the company's competitors and the risks related to the company's business
C)are also called a Form 10-Q
D)only include the company's financial statements
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Chapter 16: Introduction to Managerial Accounting
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Q1) The income statement of a service company will most likely include ________.
A)salaries expense
B)factory overhead
C)cost of goods sold
D)direct materials
Q2) Which of the following will be included in manufacturing overhead costs?
A)indirect labor and indirect materials used
B)salaries of salesmen
C)direct materials and direct labor
D)delivery costs to ship goods to customers
Q3) The Work-in-Process Inventory account includes the ________.
A)goods that are ready to be sold
B)goods that are partially completed
C)goods that have been sold in the market
D)goods that are damaged during production
Q4) Which of the following is the primary objective of managerial accounting?
A)providing information that managers need to make operational decisions
B)providing historical data to investors and creditors
C)providing summarized results of operations
D)providing information to comply with laws and regulations of government bodies
Page 18
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Chapter 17: Job Order Costing
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Q1) Overallocated manufacturing overhead occurs when the manufacturing overhead allocated to Work-in-Process Inventory is less than the amount actually incurred.
A)True
B)False
Q2) Manufacturing overhead costs are allocated to the Work-in-Process Inventory account by a debit to the Manufacturing Overhead account.
A)True
B)False
Q3) Melinda,Inc.estimates manufacturing overhead costs for the coming year at $225,000,which will be allocated based on direct labor hours.Melinda estimates 9,000 direct labor hours for the coming year.In January,Job A33 was completed,which required 8 direct labor hours and 34 machine hours.Provide the journal entry to allocate manufacturing overhead to the job.
Q4) A job order costing system is used by companies that manufacture batches of unique products or provide specialized services.
A)True
B)False
Q5) Why would the manager of a service company need to use job order costing?
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Chapter 18: Process Costing
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Q1) The weighted-average method determines the cost of equivalent units of production by accounting for beginning inventory costs separately from current period costs.
A)True
B)False
Q2) A process costing system is generally used by companies that produce homogeneous products.
A)True B)False
Q3) The cost per equivalent unit for transferred in units is calculated by dividing total transferred in costs by the equivalent units of production for transferred in units.
A)True
B)False
Q4) A production cost report shows only the calculations for the physical flow of products.
A)True B)False
Q5) Why are extra journal entries required in a process costing system?
Q6) How is a production cost report prepared using the FIFO method?
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Chapter 19: Cost Management Systems: Activity-Based,
and Quality Management Systems
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Q1) Which of the following is an example of internal failure costs?
A)costs incurred for the evaluation of the quality of suppliers' processes
B)costs incurred in the inspection at various stages of production
C)cost incurred for the reworking of substandard products
D)cost incurred as warranty expenses
Q2) ________ in just-in-time management systems is completed in self-contained work cells.
A)Selling
B)Production
C)Administration
D)Purchasing
Q3) Since quality improvement programs are always needed,there is no reason to compare the costs of undertaking a quality improvement program to the costs of continuing without the quality improvement program.
A)True
B)False
Q4) Activity-based costing can be used in determining the cost of services as well as products.
A)True
B)False
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Chapter 20: Cost-Volume-Profit Analysis
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Q1) Divine Foods produces a gourmet condiment that sells for $24 per unit.Variable cost is $6 per unit,and fixed costs are $8,000 per month.If Divine expects to sell 1,500 units,compute the margin of safety in units.(Round any intermediate calculations and your final answer to the nearest whole unit. )
A)444 units
B)1,056 units
C)1,500 units
D)19 units
Q2) If variable costs decrease,and all other factors remain the same,the margin of safety will become larger.
A)True
B)False
Q3) Contribution margin is the amount that contributes to covering variable costs. A)True
B)False
Q4) The high-low method requires the identification of the lowest and highest levels of total costs,not activity,over a period of time.
A)True
B)False
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Chapter 21: Variable Costing
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Q1) Which of the following statements is true of variable costing?
A)It considers variable manufacturing overhead as period costs.
B)It considers fixed manufacturing overhead as product costs.
C)It considers variable selling and administrative costs as product costs.
D)It considers fixed selling and administrative costs as period costs.
Q2) For every unit that is produced but not sold,absorption costing "hides" some of the fixed manufacturing overhead in ending Finished Goods Inventory.
A)True
B)False
Q3) Contribution margin is calculated by deducting ________ from sales revenue.
A)total product costs
B)total selling and administrative costs
C)total fixed costs
D)total variable costs
Q4) Absorption costing considers fixed selling and administrative costs as product costs. A)True
B)False
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Chapter 22: Master Budgets
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Q1) Which of the following statements regarding the capital expenditures budget is correct?
A)Installment payments related to the purchase of long-term assets are included in the capital expenditures budget.
B)Capital expenditures are purchases of long-term assets,such as office supplies.
C)The decision to purchase long-term assets is part of a strategic plan.
D)Capital expenditures are inexpensive assets.
Q2) Norton Manufacturing expects to produce 2,900 units in January and 3,600 units in February.Norton budgets $20 per unit for direct materials.Indirect materials are insignificant and not considered for budgeting purposes.The balance in the Raw Materials Inventory account (all direct materials)on January 1 is $38,650.Norton desires the ending balance in Raw Materials Inventory to be 10% of the next month's direct materials needed for production.Desired ending balance for February is $51,100.What is the cost of budgeted purchases of direct materials needed for January?
A)$58,000
B)$65,200
C)$26,550
D)$25,150
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Chapter 23: Flexible Budgets and Standard Cost Systems
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Q1) A favorable direct materials cost variance occurs when the actual direct materials cost incurred is greater than the standard direct materials cost.
A)True
B)False
Q2) A favorable variance has a debit balance and is a contra revenue.
A)True
B)False
Q3) Under a standard cost system,the journal entry to record direct labor includes ________.
A)a debit for standard direct labor quantity for actual production times standard direct labor cost per hour
B)a credit for standard quantity usage for actual production times actual cost per hour
C)a debit for actual quantity times standard cost per hour
D)a credit for standard quantity for actual production times standard cost per hour
Q4) A favorable variance reflects a decrease in operating income. A)True B)False
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Chapter 24: Responsibility Accounting and Performance Evaluation
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Q1) Kurtz Logistics provides the following information: \[\begin{array} { | l | r | }
\hline \text { Operating income } & \$ 1,600,000 \\
\hline \text { Net sales } & \$ 13,500,000 \\
\hline \text { Average total assets } & \$ 1,850,000 \\
\hline \text { Management's target rate of return } & 20 \% \\
\hline \end{array}\] What is the company's profit margin ratio?
A)13.7%
B)11.9%
C)86.5%
D)1.1%
Q2) The return on investment of a company is a measure of profitability and efficiency. A)True
B)False
Q3) Cost center responsibility reports generally focus on the static budget variance. A)True
B)False
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Chapter 25: Short-Term Business Decisions
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Q1) Leslie's Sunglass Company's western territory's forecasted income statement for the upcoming year is as follows: \(\begin{array}{|l|r|}
\hline\text { Sales revenue } & \$ 850,000 \\
\hline \text { Variable costs } & (520,000) \\
\hline \text { Contribution margin } & \$ 330,000 \\
\hline \text { Fixed costs } & \underline{(480,000} \\
\hline \text { Operating loss } & \$(150,000) \\
\hline
\end{array}\) The company's management is considering dropping the western territory and has determined that $310,000 of the fixed expenses is avoidable.What is the change in Leslie's Sunglass Company's forecasted operating for the upcoming year if the western territory is dropped? Assume the company predicts an operating loss across the entire company.
A)Operating loss will increase by $20,000.
B)Operating profit will increase by $330,000.
C)Operating loss will decrease by $20,000.
D)Operating profit will decrease by $330,000.
Q2) 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) Which of the following is the rate of return,based on discounted cash flows,a company can expect to earn by investing in a capital asset?
A)accounting rate of return
B)bank interest rate
C)internal rate of return
D)return on investment
Q2) The payback method is used only when the net cash inflows from a capital investment are the same for each period.
A)True
B)False
Q3) Under what circumstances is the investment with the shortest payback the best choice? How should managers use the payback method?
Q4) Which of the following best describes the profitability index?
A)an index of projects based on their net income
B)the ratio of present value of net cash inflows to initial investment
C)the ratio of total cash inflows to initial investment
D)an array of possible investment outcomes at different discount rates
Q5) List the steps of the capital budgeting process and identify actions that relate to each step.
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Chapter 27: Accounting Information Systems
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Q1) Which of the following is true of an accounts receivable subsidiary ledger?
A)It does not include a receivable account for each customer,but includes a cumulative account for all customers.
B)It contains information about the amount each customer purchased on credit,but excludes the customer name.
C)The total of the accounts in the accounts receivable subsidiary ledger must equal the accounts receivable balance in the general ledger.
D)Companies keep an accounts payable subsidiary ledger that is entirely different from the accounts receivable subsidiary ledger.
Q2) 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
Q3) A source document provides the evidence and data for accounting transactions.
A)True
B)False
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