Managerial Accounting
Midterm Exam
Course Introduction
Managerial Accounting focuses on the use of accounting information by managers within organizations to aid in decision-making, planning, and control. The course covers key topics such as budgeting, cost behavior and analysis, performance evaluation, and internal financial reporting. Through practical exercises and case studies, students will learn how to analyze financial data, allocate costs, and use various accounting tools to support business strategies and improve operational efficiency. This course equips students with the skills necessary to make informed managerial decisions that enhance organizational value.
Recommended Textbook Principles of Accounting 12th Edition by Belverd E. Needles
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Page 2
Chapter 1: Accounting Principles and the Financial Statements
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Q1) The statement of owner's equity discloses the owner's withdrawals made during the period.
A)True
B)False
Answer: True
Q2) The heading for a balance sheet might include the line "For the Month Ended December 31,20--."
A)True
B)False
Answer: False
Q3) The development of international accounting standards is the primary function of the
A)IRS.
B)AICPA.
C)IASB.
D)PCAOB.
Answer: C
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Page 3
Chapter 2: Analyzing and Recording Business Transactions
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Sample Questions
Q1) The cost principle relates most closely to the
A)recognition point.
B)recognition issue.
C)valuation issue.
D)classification issue.
Answer: C
Q2) Liabilities are established with credits and eliminated with debits.
A)True
B)False
Answer: True
Q3) Which of the following is the final step in the accounting cycle?
A)Prepare financial statements.
B)Close the accounts.
C)Prepare and adjusted trial balance.
D)Post the journal entries to the ledger.
Answer: B
Q4) The journal is a chronological record of all transactions.
A)True
B)False
Answer: True
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Chapter 3: Adjusting the Accounts
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Sample Questions
Q1) An adjusting entry includes at least one balance sheet account and at least one income statement account.
A)True
B)False
Answer: True
Q2) Net income is misleading when revenue is overstated or expenses are understated by significant amounts.
A)True
B)False
Answer: True
Q3) Profitability is best determined from cash flow information.
A)True
B)False
Answer: False
Q4) The carrying value of a depreciable asset purchased 3 years ago equals
A)original cost minus depreciation expense for the current period.
B)original cost minus accumulated depreciation.
C)the estimated cost to replace the asset at today's price.
D)the estimated amount that the asset could be sold for in today's market.
Answer: B
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) After all closing entries have been entered and posted,the balance of the Income Summary account will be zero.
A)True
B)False
Q2) The post-closing trial balance would not include which of the following accounts?
A)Unearned Legal Fees
B)Accumulated Depreciation-Office Equipment
C)Withdrawals
D)Owner's Capital
Q3) A temporary account is also known as a nominal account.
A)True
B)False
Q4) Nominal account balances are reduced to zero by closing entries.
A)True
B)False
Q5) Preparing the worksheet and closing entries provide a mechanism for applying the concept of periodicity.
A)True
B)False
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Chapter 5: Foundations of Financial Reporting and the
Classified Balance Sheet
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Sample Questions
Q1) Liabilities have which of the following two major categories?
A)Accounts payable and notes payable
B)Contributed capital and retained earnings
C)Current and long term
D)Unearned revenues and other payables
Q2) The profit margin for Cane Construction is
A)30 percent.
B)75 percent.
C)60 percent.
D)27 percent.
Q3) The conservatism convention should not be used when the accountant is certain of a particular measure.
A)True
B)False
Q4) The profit margin and asset turnover ratios are important measures,but they have a limitation.Describe these limitations and discuss the ratio that can be used to overcome these deficiencies.
Q5) Profit margin and gross margin are the same thing.
A)True
B)False
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Chapter 6: Accounting for Merchandising Operations
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Sample Questions
Q1) Upon making a credit card sale,a business should record the sale as an accounts receivable until the customer pays his or her credit card bill.
A)True
B)False
Q2) If it takes 45 days to sell inventory,30 days to collect for the sale,and creditors' payment terms are 60 days,the financing period is 135 days.
A)True
B)False
Q3) 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
Q4) In which category would office salaries expense be included?
A)Net sales.
B)Cost of goods sold.
C)Selling expenses.
D)General and administrative expenses.
Q5) Describe how to compute the cost of goods available for sale.
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Chapter 7: Inventories
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Sample Questions
Q1) The FIFO inventory method does not produce the most up-to-date figure for ending inventory.
A)True
B)False
Q2) A jeweler probably would use which of the following inventory methods?
A)Specific identification
B)FIFO
C)Average-cost
D)LIFO
Q3) Inventory on hand is considered
A)a current asset.
B)a current liability.
C)a long-term asset.
D)an expense.
Q4) In a period of declining prices,which of the following inventory methods generally results in the lowest balance sheet figure for inventory?
A)LIFO
B)Cannot tell without more information
C)FIFO
D)Average-cost
Page 9
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Chapter 8: Cash and Internal Control
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Sample Questions
Q1) The Sarbanes-Oxley Act has not stopped the occurrence of fraud,and additional guidance with regard to internal controls is expected to be issued.
A)True
B)False
Q2) A company establishes a $200 petty cash fund.The fund is replenished in the amount of $180,after petty cash vouchers of $80 for postage,$68 for donations,and $54 for meals had accumulated.Was there a cash shortage,overage,or neither? (State amount if overage or shortage. )
Q3) Sound internal control activities dictate that extra cash should always be on hand.
A)True
B)False
Q4) Which of the following would be added to the balance per books on a bank reconciliation?
A)Notes collected by the bank
B)Deposits in transit
C)Service charges
D)Outstanding checks
Q5) On a balance sheet,what items normally are included in Cash?
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Chapter 9: Receivables
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Sample Questions
Q1) Purchasing receivables with recourse is riskier than purchasing them without recourse.
A)True
B)False
Q2) The matching rule
A)results in the recording of a known amount for bad-debt losses.
B)necessitates the recording of an estimated amount for bad debts.
C)requires that all bad-debt losses be recorded when an individual customer defaults.
D)is violated when the allowance method is employed.
Q3) Following a lenient credit-granting policy will probably result in fewer defaults by customers.
A)True
B)False
Q4) When a note is dishonored,the payee's journal entry includes a
A)debit to Accounts Receivable.
B)debit to Interest Expense.
C)debit to Notes Receivable.
D)debit to Interest Income.
Q5) Explain the two methods used to estimate uncollectible accounts.
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Chapter 10: Long -Term Assets
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Sample Questions
Q1) One argument in favor of accelerated depreciation is that the asset's benefit is greater in the earlier years.
A)True
B)False
Q2) Obsolescence is not a reason for an asset's limited useful life.
A)True
B)False
Q3) In 2014,Barnes Enterprises purchased an oil well for $12,000,000.It is estimated that 80,000,000 barrels can be extracted from the well.Depletion expense during 2015,when 2,000,000 barrels were extracted and sold,totaled
A)$30,000.
B)$300,000.
C)$33,333.
D)$3,333,333.
Q4) Which of the following would not be included in the cost of land?
A)Cost of clearing unneeded building from land
B)Sewer assessment from local government
C)Cost of paving land for parking
D)Commission to real estate agent
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Chapter 11: Current Liabilities and Fair Value Accounting
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Sample Questions
Q1) The FUTA tax rate most often actually paid by employers is 0.8 percent.
A)True
B)False
Q2) Product warranties are an expense of the period in which the product is sold.
A)True
B)False
Q3) What would be the adjusting entry for a note payable whose interest is not included in the face amount of the note?
A)Debit Interest Receivable and credit Interest Income.
B)Debit Interest Expense and credit Cash.
C)Debit Interest Expense and credit Interest Payable.
D)Debit Cash and credit Notes Payable.
Q4) An ordinary annuity is a series of equal payments made at the end of equal intervals of time.
A)True B)False
Q5) In a deferred payment arrangement,interest is charged only if it is stated.
A)True
B)False
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Chapter 12: Accounting for Partnerships
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Sample Questions
Q1) It is possible to allocate income or loss to partners based solely on interest.
A)True
B)False
Q2) 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
Q3) Chelsea,Jack,and Connor have a partnership.Chelsea wishes to withdraw from the partnership by removing assets that are greater than her current capital balance.Discuss how this transaction is accounted for on the partnership books.
Q4) When the existing partners pay a bonus to a newly admitted partner,the existing partners' accounts are debited.
A)True
B)False
Q5) The salary allocation to partners also appears as Salaries Expense on the partnership income statement.
A)True
B)False
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Chapter 13: Accounting for Corporations
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Sample Questions
Q1) Draw two distinctions between accounting for a stock split and accounting for a stock dividend.
Q2) A small stock dividend normally results in a transfer from Retained Earnings to Contributed Capital of an amount equal to the market value of the stock.
A)True B)False
Q3) Preferred stock is considered the residual equity of a corporation.
A)True
B)False
Q4) Start-up and organization costs include all of the following except A)goodwill.
B)cost of printing stock certificates.
C)attorney's fees.
D)state incorporation fees.
Q5) Book value per share refers to the A)net assets represented by one share of a company's stock.
B)highest price that investors will pay for a share of stock.
C)issue price of the stock,less any market decline since issuance.
D)par or stated value of a share of stock.
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Chapter 14: Long Term Liabilities
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Sample Questions
Q1) Technically,what is meant by the amortization of a bond discount,and why is it necessary?
Q2) Bond issue costs
A)must be expensed when incurred.
B)must be amortized over the life of the bonds.
C)are recorded in an asset account and not amortized.
D)appear on the balance sheet as a liability.
Q3) The amount of cash received on issuance of a 9 percent,$10,000 bond dated February 1 and issued June 1 at 102 1/2 is
A)$10,300.
B)$11,100.
C)$10,200.
D)$10,550.
Q4) Under a defined benefit pension plan,
A)actuarial computations are unnecessary.
B)accounting for annual pension expense is simple.
C)retirement payments are based on the amount accumulated in the pension fund.
D)the employer guarantees the employees certain benefits upon retirement.
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) The primary purpose of the statement of cash flows is to provide information about a company's cash receipts and cash payments during an accounting period.
A)True
B)False
Q2) Which of the following is reported as a noncash investing and financing transaction on the statement of cash flows?
A)Purchase of a building by taking out a long-term mortgage.
B)Purchase of treasury stock.
C)Payment of long-term debt.
D)Sale of preferred stock.
Q3) Cash equivalents include money market accounts,commercial paper,and U.S.Treasury bills.
A)True B)False
Q4) 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
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Chapter 16: Financial Statement Analysis
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Sample Questions
Q1) Liquidity ratios are an indication of a company's
A)ability to effectively employ its resources.
B)overall debt to equity position.
C)overall debt position.
D)ability to pay bills when they are due and to meet unexpected needs for cash.
Q2) 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
Q3) For details about the financial histories of companies,one could consult publications of Moody's and Standard & Poor's.
A)True
B)False
Q4) When using an index number,one sets the most recent number in a series equal to 100.
A)True B)False
Q5) Briefly explain a "big bath" including when it occurs and why it occurs.
Page 18
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Chapter 17: Managerial Accounting and Cost Concepts
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Sample Questions
Q1) Management accounting information demands more objectivity than financial accounting information.
A)True
B)False
Q2) 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:
Q3) The standard costing method uses estimated costs to find product unit cost.
A)True
B)False
Q4) The management accountant must be knowledgeable about all relevant laws,regulations,and technical standards that pertain to his or her duties.
A)True
B)False
Q5) All product costs are expensed in the period in which they are paid in cash.
A)True
B)False
Q6) Give two examples of each stage in the management process.
Page 19
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Chapter 18: Costing Systems: Job Order Costing
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Q1) In a job order costing system,indirect labor costs are recorded by increasing the Payroll Payable account and increasing the Overhead account.
A)True
B)False
Q2) Teddy's To Hug,produces Teddy Bears for heart patients.Last month the company produced 500 bears.Using job order costing,determine the product unit cost for one bear based on the following costs: production facility utilities,$600;depreciation on production equipment,$550;indirect materials,$450;direct materials,$1,300;indirect labor,$900;direct labor,$2,500;sales commissions,$3,000;president's salary,$5,000;insurance on production facility,$700;advertising expense,$600;rent on production facility,$5,000;rent on sales office,$3,000;and legal expense,$300.Round your answer to two decimal places.
Q3) In a job order costing system,the transfer of overhead costs to the Work in Process Inventory account must take place before product unit costs can be computed.
A)True
B)False
Q4) Explain the similarities and differences between job order costing and process costing.Focus on the characteristics of each system.
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Chapter 19: Costing Systems Process Costing
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Q1) In a process cost report,accounting for physical units excludes the physical units in beginning inventory to arrive at "units to be accounted for."
A)True
B)False
Q2) Direct materials are most likely added at the beginning of the process.
A)True
B)False
Q3) Regardless of beginning inventory levels,beginning inventory is always ignored while computing the equivalent units of production.
A)True
B)False
Q4) The type of product costing system used by a company is dictated by the A)project manager.
B)production process.
C)company president.
D)plant supervisor.
Q5) Mention the two cost allocation methods used in a process costing system.
Q6) How are costs recognized,matched,and measured in a process costing system?
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Chapter 20: Value-Based Systems: Activity-Based Costing and Lean Accounting
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Q1) In a just-in-time environment,
A)production runs are interrupted each day at setup time to perform routine maintenance.
B)scheduled and preventive maintenance is extremely important. C)cost savings are realized by performing maintenance whenever it is needed.
D)routine minor maintenance is always performed by the repair department.
Q2) Reports and analyses prepared in traditional management settings will match the requirement of the new manufacturing environment.
A)True
B)False
Q3) In the JIT environment,direct materials and conversion costs will vary significantly for each product in a work cell.
A)True
B)False
Q4) The value chain is also called the supply chain.
A)True
B)False
Q5) How can activity-based systems help managers in a global marketplace?
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Q6) When using a just-in-time system,what qualities should be a supplier posses?
Chapter 21: Cost-Volume-Profit Analysis
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Q1) In cost-volume-profit analysis,sales revenue is computed by multiplying units sold by the selling price per unit,and the targeted profit is projected by management.
A)True
B)False
Q2) The high-low method
A)calculates variable costs per unit by dividing the difference in the high and low activity levels by the high and low costs.
B)gives accurate results of cost estimation,irrespective of the relevant range.
C)helps in determining the fixed and variable components of a mixed cost.
D)is based on the premise that all data points are necessary to define a linear cost-volume relationship.
Q3) Contribution margin is calculated by deducting variable costs from sales.
A)True B)False
Q4) Practical capacity and engineering capacity are synonymous terms.
A)True
B)False
Q5) Briefly explain the use of statistical methods to separate mixed cost components.
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Chapter 22: The Budgeting Process
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Sample Questions
Q1) The cash receipts in November for October sales of Great Lake are expected to be
A)$8,000.
B)$9,600.
C)$9,408.
D)$7,840.
Q2) Financial budgets include
A)pro forma financial statements,a sales budget,and a cost of goods manufactured budget.
B)a budgeted income statement and budgeted balance sheet only.
C)a budgeted income statement,budgeted balance sheet,and cash budget.
D)pro forma financial statements,a capital expenditures budget,and a cash budget.
Q3) What is the planned production of Richard?
A)21,700
B)28,100
C)27,900
D)34,300
Q4) Operating budgets are plans used in daily operations.
A)True
B)False
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Chapter 23: Flexible Budgets and Performance Analysis
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Q1) Which of the following is a performance measure?
A)Quality of raw materials used in production
B)Number of orders shipped in a day
C)Level of customer satisfaction
D)All of these choices
Q2) To succeed,an organization must add value for all of its stakeholders in the short term only.
A)True
B)False
Q3) Why might stock options not be the best way to promote coordination of goals?
A)Stock prices can fluctuate quickly.
B)Many of the variables that affect stock prices are beyond a manager's control.
C)Employees generally do not value stock options very highly.
D)None of these choices
Q4) The effectiveness of a performance management and evaluation system depends on how well it coordinates the goals of
A)the entire company.
B)responsibility centers.
C)managers.
D)All of these choices
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Chapter 24: Standard Costing and Variance Analysis
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Q1) Which of the following is not included in performance reports?
A)Standard costs
B)Normal capacity
C)Total plantwide overhead costs
D)Budgeted costs
Q2) A performance report should contain cost or revenue items that the manager receiving the report can control.
A)True
B)False
Q3) The direct materials price variance is the difference between the standard price and the actual price,multiplied by the actual quantity.
A)True
B)False
Q4) The direct materials price variance is best measured and reported to appropriate management personnel at the time
A)purchased quantities exceed standard order size.
B)quarterly financial statements are prepared.
C)shipments are received and recorded as purchases.
D)direct materials are issued to production areas.
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Chapter 25: Short-Run Decision Analysis and Capital Budgeting
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Q1) Why is the book value of equipment irrelevant when considering the replacement of equipment?
Q2) Joint costs are also referred to as common cost.
A)True
B)False
Q3) Decisions to install new equipment,replace old equipment,and purchase or construct a new building are examples of
A)capital investment decisions.
B)qualitative decisions.
C)sales mix decisions.
D)direct costing decisions.
Q4) Sunk costs arise when the choice of one course of action eliminates the possibility of another course of action.
A)True
B)False
Q5) Which of the following typically would be considered an incremental cost?
A)Fixed cost
B)Direct product cost
C)Sunk cost
D)Administrative overhead cost
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