Managerial Accounting Midterm Exam
Course Introduction
Managerial Accounting explores the principles and techniques used by managers to make informed business decisions based on financial information. The course covers essential topics such as cost behavior, budgeting, variance analysis, and performance measurement. Emphasis is placed on the use of accounting data for planning, controlling, and evaluating organizational operations. Through case studies and real-world examples, students learn to analyze financial information, assess internal processes, and support strategic decision-making in a variety of business settings. This course equips students with the analytical tools necessary to interpret and utilize accounting data for effective management.
Recommended Textbook
Financial and Managerial Accounting 11th Edition by Carl S. Warren
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Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) Most businesses in the United States are
A) proprietorships
B) partnerships
C) corporations
D) separate entities
Answer: A
Q2) Explain the meaning of the business entity concept.
Answer: The business entity concept limits the economic data in an accounting system to
data related directly to the activities of the business. In other words, the business is viewed as an entity separate from its owners, creditors, or other businesses
Q3) The debt created by a business when it makes a purchase on account is referred to as an
A) account payable
B) account receivable
C) asset
D) expense payable
Answer: A
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Chapter 2: Analyzing Transactions
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Sample Questions
Q1) The classification and normal balance of the supplies expense account is a(n)
A) asset with a debit balance
B) asset with a credit balance
C) expense with a debit balance
D) liability with a credit balance
Answer: C
Q2) The gross increases in retained earnings attributable to business activities are called A) assets
B) liabilities
C) revenues
D) net income
Answer: C
Q3) The erroneous moving of an entire number one or more spaces to the right or left, such as writing $85 as $850, is called a transposition.
A)True
B)False
Answer: False
Q4) Prepare a journal entry on October 12 for the fees earned on account, $14,600. Answer: 11ea9299_7dcd_eb7d_85c7_2f00c9568000_TB6235_00
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) The matching concept supports matching expenses with the related revenues.
A)True
B)False
Answer: True
Q2) The financial statements are prepared from the unadjusted trial balance.
A)True
B)False
Answer: False
Q3) Which of the following is an example of an accrued expense?
A) Salary owed but not yet paid
B) Fees received but not yet earned
C) Supplies on hand
D) A two-year premium paid on a fire insurance policy
Answer: A
Q4) On January 1st, Power House Co. prepays the year's rent, $10,140 to its landlord. Prepare the journal entry by recording the prepayment to an asset account.
Answer: 11ea9299_7dc2_eeac_85c7_d79ddf78ad9b_TB6235_00
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) The majority of businesses end their fiscal year on December 31. A)True
B)False
Q2) Current liabilities are those liabilities that A) will be paid in less than one year B) are due to be paid in 5 to 10 years C) are due to be paid in more than one year D) are owed to the stockholders and will never be paid
Q3) The most important output of the accounting cycle is the financial statements.
A)True
B)False
Q4) The usual presentation of the retained earnings statement is (1) beginning retained earnings, (2) net income or loss, (3) dividends (4) ending retained earnings. A)True
B)False
Q5) The trial balance prepared after all the closing entries have been posted is called a pre-closing trial balance.
A)True
B)False
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Chapter 5: Accounting for Merchandising Businesses
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Sample Questions
Q1) Ramone Company had $600,000 in Net Sales for the year 2011. The total assets at the beginning of the year were $240,000 and total assets at the end of the year were $280,000. The ratio of net sales to total assets is (round answer to 2 decimal places):
A) 2.31
B) 1.15
C) .43
D) .87
Q2) Generally, the revenue account for a merchandising business is entitled
A) Sales
B) Net Sales
C) Gross Sales
D) Gross Profit
Q3) If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment, the terms are stated as FOB destination.
A)True
B)False
Q4) Freight-in is considered a cost of purchasing inventory.
A)True
B)False
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Chapter 6: Inventories
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Sample Questions
Q1) A business using the retail method of inventory costing determines that merchandise inventory at retail is $1,700,000. If the ratio of cost to retail price is 55%, what is the amount of inventory to be reported on the financial statements?
Q2) If ending inventory for the year is understated, net income for the year is overstated.
A)True
B)False
Q3) Merchandise inventory at the end of the year is overstated. Which of the following statements correctly states the effect of the error?
A) retained earnings is overstated
B) cost of merchandise sold is overstated
C) gross profit is understated
D) net income is understated
Q4) The inventory method that assigns the most recent costs to cost of goods sold is A) FIFO
B) LIFO
C) average
D) specific identification
Q5) List three different security measures taken by stores to safeguard inventory.
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Chapter 7: Sarbanes-Oxley, Internal Control, and Cash
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Sample Questions
Q1) List and define each of the five elements of internal control.
Q2) For each of the following, explain whether the issue would require you to prepare a journal entry for your company, assuming any original entry is correct. If an entry is required, please include it as part of your answer.
(1) The bank recorded your deposit as $75 rather than the actual amount of $175.
(2) Two outstanding checks amounted to $280.
(3) Company check number 538 for postage was recorded incorrectly by the company bookkeeper as $79 instead of $97.
(4) The bank paid a check for $500 after the company had issued a stop payment and voided the check.
(5) An EFT deposit was made by one of the company's customers, Atlas Design, for merchandise received. The sale had previously been recorded when shipped and was equal to the payment amount of $85.
Q3) Why would a bank require a company to maintain a compensating balance?
Q4) EFT
A) means Efficient Funds Transfer
B) can process certain cash transactions at less cost than by using the mail
C) makes it easier to document purchase and sale transactions
D) means Effective Funds Transfer
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Chapter 8: Receivables
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Sample Questions
Q1) The receivable that is usually evidenced by a formal instrument of credit is a(n)
A) trade receivable.
B) note receivable.
C) accounts receivable.
D) income tax receivable.
Q2) When using the analysis of receivables method for estimating uncollectible receivables, the amount computed in the analysis is usually the amount that would be recorded in the end-of-period adjusting entry.
A)True
B)False
Q3) Trade receivables occur when two companies trade or exchange notes receivables.
A)True
B)False
Q4) Notes Receivable and Accounts Receivable can also be called trade receivables.
A)True
B)False
Q5) When a note is written to settle an open account, no entry is necessary.
A)True
B)False
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Chapter 9: Fixed Assets and Intangible Assets
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Q1) A capitalized asset will appear on the balance sheet as a long term asset.
A)True
B)False
Q2) The double-declining-balance method is an accelerated depreciation method.
A)True
B)False
Q3) A machine costing $85,000 with a 5-year life and $5,000 residual value was purchased January 2, 2011. Compute depreciation for each of the five years, using the declining-balance method at twice the straight-line rate.
Q4) Which of the following should be included in the acquisition cost of a piece of equipment?
A) transportation costs
B) installation costs
C) testing costs prior to placing the equipment into production
D) all are correct
Q5) An operating lease is accounted for as if the lessee has purchased the asset.
A)True
B)False
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Chapter 10: Current Liabilities and Payroll
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Sample Questions
Q1) For proper matching of revenues and expenses, the estimated cost of fringe benefits must be recognized as an expense of the period during which the employee earns the benefits.
A)True
B)False
Q2) An employee's take home pay is equal to gross pay less all voluntary deductions.
A)True
B)False
Q3) All long-term liabilities eventually become current liabilities.
A)True
B)False
Q4) The amount of federal income taxes withheld from an employee's gross pay is recorded as a(n)
A) payroll expense
B) contra account
C) asset
D) liability
Q5) The borrower is the one who issues a note payable to a creditor.
A)True
B)False
Page 12
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Chapter 11: Corporations: Organization, Stock Transactions, and Dividends
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Sample Questions
Q1) If common stock is issued for an amount greater than par value, the excess should be credited to
A) Retained Earnings.
B) Cash.
C) Legal Capital.
D) Paid-in Capital in Excess of Par Value.
Q2) Treasury stock that had been purchased for $6,400 last month was reissued this month for $8,500. The journal entry to record the reissuance would include a credit to A) Treasury Stock for $8,500
B) Paid-In Capital from Treasury Stock for $8,500
C) Paid-In Capital in Excess of Par/Common for $2,100
D) Paid-In Capital from Treasury Stock for $2,100
Q3) Twenty percent of all businesses in the United States are corporations and they account for 80% of the total business dollars generated.
A)True B)False
Q4) The issuance of common stock affects both paid-in capital and retained earnings. A)True B)False
Page 13
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Chapter 12: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) Bondholders claims on the assets of the corporation rank ahead of stockholders.
A)True
B)False
Q2) If bonds payable are not callable, the issuing corporation
A) cannot repurchase them before maturity
B) can repurchase them in the open market
C) must get special permission from the SEC to repurchase them
D) is more likely to repurchase them if the interest rates increase
Q3) The journal entry a company records for the payment of interest, interest expense, and amortization of bond discount is
A) debit Interest Expense, credit Cash and Discount on Bonds Payable
B) debit Interest Expense, credit Cash
C) debit Interest Expense and Discount on Bonds Payable, credit Cash
D) debit Interest Expense, credit Interest Payable and Discount on Bonds Payable
Q4) At 12/31/2009, the cash and securities held in a sinking fund to redeem bonds in 2011 are classified on the balance sheet as current assets.
A)True
B)False
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Chapter 13: Investments and Fair Value Accounting
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Sample Questions
Q1) Which of the following stock investments should be accounted for using the cost method?
A) investments of less than 20%
B) investments between 20 % and 50%
C) investments of less than 20% and investments between 20% and 50%
D) all stock investments should be accounted for using the cost method
Q2) Investment in Bonds are reported on the balance sheet at lower of cost or market. A)True B)False
Q3) The account Unrealized Gain (Loss) on Available-For-Sale Securities should be included in the
A) Income statement as Other Revenue (Expenses)
B) Balance sheet as an adjustment to the asset account
C) Balance sheet as an adjustment to Stockholders' Equity
D) Statement of Retained Earnings
Q4) On April 1, 2012, ValueTime, Inc. had a market price per common share of $32. For the previous year ValueTime paid a dividend of $1.20 per share. Compute the dividend yield for ValueTime, Inc.
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Chapter 14: Statement of Cash Flows
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Q1) Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity and dividends.
A)True
B)False
Q2) Free cash flow is
A) all cash in the bank
B) cash from operations
C) cash from financing, less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends
D) cash flow from operations, less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends
Q3) Investing activities include
A) collecting cash on loans made.
B) obtaining cash from creditors.
C) obtaining capital from owners.
D) repaying money previously borrowed.
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) A balance sheet that displays only component percentages is called A) trend balance sheet
B) comparative balance sheet
C) condensed balance sheet
D) common-sized balance sheet
Q2) Reporting unusual items separately on the income statement allows investors to isolate the effects of these items on income and cash flows.
A)True
B)False
Q3) An extraordinary item must be either unusual in nature or infrequent in occurrence. A)True B)False
Q4) Current position analysis indicates a company's ability to liquidate current liabilities. A)True B)False
Q5) What information is generally included in the Management Discussion and Analysis (MD&A) section of a corporate annual report?
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