Managerial Accounting
Midterm Exam
Course Introduction
Managerial Accounting is a course designed to introduce students to the principles, techniques, and processes used by managers to make informed business decisions. The course covers fundamental topics such as cost behavior, budgeting, performance evaluation, cost-volume-profit analysis, and the use of accounting information in planning and controlling organizational operations. Emphasis is placed on the interpretation and application of financial data for internal decision-making, enabling students to analyze costs, assess profitability, and participate effectively in strategic management. The course is essential for understanding how accounting data drives business planning and operational efficiency.
Recommended Textbook
Financial and Managerial Accounting Information for Decisions 5th Edition by John J Wild
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Chapter 1: Introducing Accounting in Business
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Sample Questions
Q1) Below is accounting information for Cascade Company for 2013: \[\begin{array} { | l | r | }
\hline \text { Revenue } & \$ 416,000 \\
\hline \text { Cash } & \$ 120,0000 \\
\hline \text { Cormmon stock } & \$ 200, 000 \\
\hline \text { Expenses } & \$ 300, 000 \\
\hline \text { Equipment } & \$ 240, 000 \\
\hline \text { Accounts receivable } & \$ 35,0 000 \\
\hline \text { Nates payable } & \$ 50,000 \\
\hline \text { Notes receivable } & \$ 62,000 \\
\hline \end{array}\]
What were the total assets at year-end?
A) $320,000
B) $296,000
C) $316,000
D) $457,000
E) $116,000
Answer: D
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Chapter 2: Analyzing and Recording Transactions
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Sample Questions
Q1) Rocky Industries received its telephone bill in the amount of $300 and immediately paid it.Rocky's journal entry to record this transaction will include a
A) Debit to Telephone Expense for $300.
B) Credit to Accounts Payable for $300.
C) Debit to Cash for $300.
D) Credit to Telephone Expense for $300.
E) Debit to Accounts Payable for $300.
Answer: A
Q2) An account used to record the owners' investments in the business is called:
A) Dividends
B) Common Stock
C) Revenue
D) Expense
E) Liability
Answer: B
Q3) A compound journal entry affects no more than two accounts.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Adjusting Accounts and Preparing Financial Statements
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Sample Questions
Q1) Closing entries are normally entered in the general journal and then posted to the work sheet.
A)True
B)False
Answer: False
Q2) Throughout an accounting period,the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees.What is the end-of-period adjusting entry to record the portion of those fees that have been earned?
A) Debit Cash and credit Legal Fees Earned.
B) Debit Cash and credit Unearned Legal Fees.
C) Debit Unearned Legal Fees and credit Legal Fees Earned.
D) Debit Legal Fees Earned and credit Unearned Legal Fees.
E) Debit Unearned Legal Fees and credit Accounts Receivable.
Answer: C
Q3) In accrual accounting,accrued revenues are recorded as liabilities.
A)True
B)False
Answer: False
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Chapter 4: Accounting for Merchandising Operations
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Sample Questions
Q1) A company had net sales of $741,800.Its cost of goods sold must have been _________ to yield a gross profit of $282,884.
Q2) Expenses that support the overall operations of a business and include the expenses relating to accounting,human resource management,and financial management are called:
A) Cost of goods sold.
B) Selling expenses.
C) Purchasing expenses.
D) General and administrative expenses.
E) Nonoperating activities.
Q3) The acid-test ratio reflects the ___________ of a company.
Q4) Under the ___________ system,each purchase,purchase return and allowance,purchase discount,and transportation-in transaction is recorded in a separate temporary account.
Q5) Describe the key attributes of inventory for a merchandising company.
Q6) The profit margin ratio is gross margin divided by total assets.
A)True
B)False
Q7) Identify and explain the key components of income for a merchandising company.
Page 6
Q8) Explain the cost flows and operating activities of a merchandising company.
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Chapter 5: Inventories and Cost of Sales
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Sample Questions
Q1) The inventory turnover ratio is computed by dividing average merchandise inventory by cost of goods sold.
A)True
B)False
Q2) Identify and describe the four inventory valuation methods.
Q3) The assignment of costs to the cost of goods sold and to inventory under FIFO is the same for both the perpetual and periodic inventory systems.
A)True
B)False
Q4) The full disclosure principle:
A) Requires that when a change in inventory valuation method is made, the notes to the financial statements report the type of change, why it was made, and its effect on net income.
B) Requires that companies use the same accounting method for inventory valuation period after period.
C) Is not subject to the materiality principle.
D) Is only applied to retailers.
E) Is also called the consistency principle.
Q5) Explain why the lower of cost or market rule is used to value inventory.
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Chapter 6: Cash and Internal Controls
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Sample Questions
Q1) A petty cash fund was originally established with a check for $150.In the petty cash fund on December 31 (the period-end),you find the following:
\[\begin{array} { | l | l | r | }
\hline \text { Petty cash receipts } & \text { Postage } & \$ 43.50 \\
\hline & \text { Office supplies } & 51.85 \\
\hline & \text { Office equipment repair } & 49.00 \\
\hline { \text { Cash } } && 4.25 \\
\hline \end{array}\]
Prepare the general journal entry to record the replenishment of the petty cash fund on December 31.
Q2) The number of days' sales uncollected:
A) Is used to evaluate the liquidity of receivables.
B) Is calculated by dividing accounts receivable by sales.
C) Measures a company's ability to pay its bills on time.
D) Measures a company's debt to income.
E) Is calculated by dividing sales by accounts receivable.
Q3) An employee is __________ when a company purchases an insurance policy against losses from theft by that employee.
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Page 8
Chapter 7: Accounts and Notes Receivable
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Sample Questions
Q1) At December 31 of the current year,a company reported the following:
Total sales for the current year: $780,000,includes $160,000 in cash sales.
Accounts receivable balance at Dec.31,current year: $190,000.
Bad debts written off during the current year: $6,800.
Balance of allowance for doubtful accounts at January 1,current year: $8,300 credit.
Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal:
a.1.5% of credit sales
b.5% of accounts receivable
Q2) Pepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year.Coca-Cola's turnover was 9.3 for this year and 9.3 for last year.These results imply that:
A) Coke has the better turnover for both years.
B) Pepsi has the better turnover for both years.
C) Coke's turnover is improving.
D) Coke's credit policies are too loose.
E) Coke is collecting its receivables more quickly than Pepsi in both years.
Q3) Explain how to record the receipt of a note receivable.
Q4) Explain the options a company has when converting its receivables to cash.
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Chapter 8: Long-Term Assets
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Sample Questions
Q1) Describe the accounting for natural resources,including their acquisition,cost allocation,and account titles.
Q2) A company purchased equipment valued at $825,000 on January 1.The equipment has an estimated useful life of seven years or 6 million units.The equipment is estimated to have a salvage value of $35,000.Assuming the units of production method of depreciation,what is the annual depreciation for the second year if .5 million units were produced?
Q3) A company purchased a truck on October 1 of the current year at a cost of $40,000.The truck is expected to last six years and have a salvage value of $2,200.The company's annual accounting period ends on December 31.
1.What is the depreciation expense for the current year,assuming the straight-line method is used?
2.What is the depreciation expense for the current year,assuming the double-declining-balance method is used?
Q4) A company had net sales of $230,000 for 2013 and $288,000 for 2014.The company's average total assets for 2013 were $150,000 and $180,000 for 2014.Calculate the total asset turnover for each year and comment on the company's efficiency in the use of its assets.
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Page 10
Chapter 9: Current Liabilities
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Sample Questions
Q1) Employers must keep certain payroll records,including individual earnings reports for each employee.
A)True
B)False
Q2) A lawsuit is an example of a contingent liability for the defendant.
A)True
B)False
Q3) Karen Cooper,the founder of SmartIT Staffing,realized that effectively managing payroll was crucial to the success of her business.If an employee of the company earns $50,500 per year,SmartIT Staffing's total FICA payroll tax for this employee is:
A) $3,863.25.
B) $3,131.00.
C) $732.25.
D) $3,535.
E) Zero because the employee has not earned more that the FICA earnings limitation.
Q4) Unearned revenues are listed on the balance sheet under liabilities.
A)True
B)False
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11
Chapter 10: Long-Term Liabilities
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Sample Questions
Q1) The contract between the bond issuer and the bondholders,which identifies the rights and obligations of the parties,is called a(n):
A) Debenture
B) Bond indenture
C) Mortgage
D) Installment note
E) Mortgage contract
Q2) A company issued 9.2%,10-year bonds with a par value of $100,000.Interest is paid semiannually.The market interest rate on the issue date was 10% and the issuer received $95,016 cash for the bonds.On the first semiannual interest date,what amount of cash should be paid to the holders of these bonds for interest?
Q3) The issue price of bonds is found by computing the present value of the bond's cash payments,discounted at the _______________ rate of interest at the time of issuance.
Q4) A basic present value concept is that cash received in the future is worth more value than the same amount of cash received today.
A)True
B)False
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Page 12
Chapter 11: Corporate Reporting and Analysis
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Sample Questions
Q1) A company's stock is selling for $35 per share at year-end.This current year it paid shareholders a $2.45 per share cash dividend,reported earnings per share of $12.00,and had 750,000 common shares outstanding at year-end.Calculate the company's dividend yield.
Q2) When a company declares cash dividends,retained earnings is reduced.
A)True
B)False
Q3) Stocks that pay relatively large cash dividends on a regular basis are referred to as:
A) Small capital stocks
B) Mid capital stocks
C) Growth stocks
D) Large capital stocks
E) Income stocks
Q4) Par value of a stock refers to the:
A) Issue price of the stock.
B) Value assigned to a share of stock by the corporate charter.
C) Market value of the stock on the date of the financial statements.
D) Maximum selling price of the stock.
E) Dividend value of the stock.
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Chapter 12: Reporting Cash Flows
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Sample Questions
Q1) Use the following information about the current year's operations of a company to calculate the cash paid for merchandise.
\[\begin{array} { | l | r | }
\hline \text { Cost of good sold } & \$ 536,000 \\
\hline \text { Merchandise inventory, January 1 } & 64,800 \\
\hline \text { Merchandise inventory, December 31 } & 57,000 \\
\hline \text { Accounts payable, January 1 } & 64,400 \\
\hline \text { Accounts payable, December 31 } & 59,000 \\
\hline
\end{array}\]
A) $522,800
B) $533,600
C) $528,200
D) $536,000
E) $543,800
Q2) The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.
A)True
B)False
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Page 14
Chapter 13: Analysis of Financial Statements
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Sample Questions
Q1) If a company's activities include operations that are being discontinued,the income or loss from the discontinued operations are included on the income statement as part of income from continuing operations.
A)True
B)False
Q2) A company had a market price of $83.12 per share,dividends per share of $5.40,and Earnings per share of $4.87.Its price-earnings ratio is equal to:
A) .056
B) .065
C) 8.09
D) 15.39
E) 17.07
Q3) Vertical analysis is the comparison of a company's financial condition and performance through time.
A)True
B)False
Q4) The comparison of a company's financial condition and performance across time is known as ________________________________.
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Chapter 14: Managerial Accounting Concepts and Principles
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Sample Questions
Q1) Managerial accounting is an activity that provides financial and nonfinancial information to an organization's managers and other internal decision makers.
A)True
B)False
Q2) Information for the Ace Manufacturing Company follows: \(\begin{array}{lr}
\text { Beginning raw materials inventory } & \$ 53,200 \\
\text { Beginning goods in process, inventory } & 78,400 \\
\text { Ending raw materials inventory } & 58,100 \\
\text { Ending goods in process, inventory } & 98,000 \\
\text { Direct labor } & 149,800 \\
\text { Total factory overhead } & 105,000 \\
\text { Raw material purchases } & 210,000
\end{array}\)
Calculate the cost of goods manufactured for this company.
Q3) The balanced scorecard aids in continuous improvement by augmenting financial measures with drivers or indicators of future financial performance.
A)True
B)False
Page 16
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Chapter 15: Job Order Costing and Analysis
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Sample Questions
Q1) The raw materials section of a job cost sheet shows the materials costs assigned to a job,but the direct labor section shows only the total hours of labor exerted by employees on the job.
A)True
B)False
Q2) A company's ending inventory of finished goods has a cost of $35,000 and consists of 750 units.If the overhead applicable to these goods is $8,400,and overhead is applied at the rate of 60% of direct labor,what is the cost of the direct materials used to produce these units?
Q3) Job order manufacturing systems would be appropriate for companies that produce training films for a specific customer.
A)True
B)False
Q4) When a job is finished,its job cost sheet is completed and moved from the jobs in process file to the ____________________ file.
Q5) The collection of job cost sheets for all jobs in process makes up the subsidiary ledger controlled by the _____________________ inventory.
Q6) How does job order cost accounting affect the company Astor and Black?
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Chapter 16: Process Costing
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Q1) What was the cost of the goods transferred out of the Bagging Department and into the finished goods inventory?
Q2) The number of equivalent units of production assigned to ending goods in process inventory should usually be equal to or less than the number of physical units in ending goods in process inventory.
A)True
B)False
Q3) A process cost summary involves computations and analysis at four sequential steps.These are (1) _________ (2) _____________,(3) _______________,and (4) ______________.
Q4) In process cost accounting,the classification of materials as direct or indirect depends on whether they are clearly linked with a specific process. A)True
B)False
Q5) A ____________________ system contains features of both process and job order operations.
Q6) What is meant by equivalent units of production,and why are they important when a process cost accounting system is used?
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Chapter 17: Activity-Based Costing and Analysis
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Sample Questions
Q1) Heritage Industries uses departmental overhead rates and is planning on a $2 per machine hour overhead rate for the molding department.Compute the estimated manufacturing overhead cost for the molding department given the information shown in the table.
A) $195,000
B) $162,500
C) $130,000
D) $325,000
E) $357,500
Q2) A _______________________ overhead rate is a single overhead rate determined by using volume-related measures.
Q3) Compute Aztec's departmental overhead rate for the baking department based on machine hours.
A) $1.50 per MH
B) $5.00 per MH
C) $0.75 per MH
D) $0.50 per MH
E) $2.08 per MH
Q4) What is the basic principle underlying activity-based costing?
Q5) The ________________________ is the target of the cost assignment.
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Chapter 18: Cost-Volume-Profit Analysis
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Sample Questions
Q1) The contribution margin per unit expressed as a percentage of the product's selling price is the:
A) Volume variance.
B) Margin of safety.
C) Contribution margin ratio.
D) Break-even point.
E) Rate of return on sales.
Q2) The margin of safety is the excess of:
A) Break-even sales over expected sales.
B) Expected sales over variable costs.
C) Expected sales over fixed costs.
D) Fixed costs over expected sales.
E) Expected sales over break-even sales.
Q3) Kelley Company and Mason Company each have sales of $200,000 and costs of $140,000.Kelley Company's costs consist of $40,000 fixed and $100,000 variable,while Mason Company's costs consist of $100,000 fixed and $40,000 variable.Which company will suffer the greatest decline in profits if sales volume declines by 15%?
Q4) What is an important feature that must be remembered when using cost estimation methods?
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Chapter 19: Variable Costing and Performance Reporting
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Q1) Assume a company sells a given product for $18 per unit.Variable selling costs are $0.70 per unit and variable production costs are $5.30 per unit.If the company breaks even when selling 4,000,000 units,what are total fixed costs?
Q2) Shore Company reports the following information regarding its production cost. \(\begin{array}{ll}
\text { Units produced } & 28,000 \text { units } \\
\text { Direct labor } & \$ 23 \text { per unit } \\
\text { Direct materials } & \$ 24 \text { per unit } \\
\text { Variable overhead } & \$ 280,000 \mathrm{in} \text { total } \\
\text { Fixed overhead } & \$ 94,920 \mathrm{in} \text { total } \end{array}\)
Compute production cost per unit under absorption costing.
A) $57.00
B) $60.39
C) $47.00
D) $23.00
E) $24.00
Q3) What is the formula to compute break-even volume in units?
Q4) What costs are treated as product costs under the absorption costing method?
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Chapter 20: Master Budgets and Performance Planning
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Q1) Activity-based budgeting is a budget system based on expected activities and their activity levels,which helps management plan for the resources required.
A)True
B)False
Q2) There are three major subgroups of the master budget.These are ________________________,___________________,and
Q3) Which of the following factors is least likely to be considered in preparing a sales budget?
A) Plant capacity.
B) General economic and industry conditions.
C) Past sales volume.
D) The capital expenditures budget.
E) Proposed selling expenses, such as advertising.
Q4) What is a sales budget? How is the sales budget prepared?
Q5) The manufacturing budget shows only the direct materials needed for production.
A)True B)False
Q6) What is activity-based budgeting?
Q7) Describe at least five benefits of budgeting.
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Chapter 21: Flexible Budgets and Standard Costs
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Q1) Bartels Corp.produces woodcarvings.It takes two hours of direct labor to produce a carving.Bartels' standard labor cost is $12 per hour.During August,Bartels produced 10,000 carvings and used 21,040 hours of direct labor at a total cost of $250,376.What is Bartels' labor cost variance for August?
A) $10,376 unfavorable
B) $2,104 unfavorable
C) $2,104 favorable
D) $12,480 unfavorable
E) $ 12,480 favorable
Q2) Should both favorable and unfavorable variances be investigated,or only the unfavorable ones? Explain.
Q3) What is the direct materials price variance?
A) $400 unfavorable
B) $450 unfavorable
C) $2,500 unfavorable
D) $2,550 unfavorable
E) $2,950 unfavorable
Q4) The fixed overhead variance can be broken down into the _________________ variance and the _________________ variance.
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Chapter 22: Decentralization and Performance Measurement
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Q1) Eclectic Furniture Company allocates its indirect salaries of $12,500 on the basis of sales.Determine the indirect salaries allocated to Departments 1 and 2 using the following information: \(\begin{array}{lrrr} &\text { Dept. } 1& \text { Dept. } 2 &\text { Combined }\\ \text { Revenues from sales } & \$ 182,000 & \$ 78,000 & \$ 260,000 \\ \text { Direct salaries } & 42,250 & 22,750 & 65,000 \end{array}\)
Salaries allocated Dept.1 _______________
Salaries allocated to Dept.2 _______________
Q2) The process of preparing departmental income statements starts with allocating service departments.
A)True B)False
Q3) A ______________________________ is the value used to record transfers of items between divisions of the same company.
Q4) Define joint costs and explain how joint costs can be allocated.
Q5) List the steps required to prepare a departmental income statement.
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Chapter 23: Relevant Costing for Managerial Decisions
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Q1) A local learning center is considering replacing the computers in its facility with thin client technology,thereby eliminating the need for individual computers at each station in the lab.The cost to purchase and install this new technology is $450,000 and it is projected to last for six years.The existing computers have a book value of $70,000 and a market value of $18,000 if they were to be sold.They expect to save a fair amount of money in maintenance costs and software upgrades if they go to the new technology. Required:
a.What would the annual savings have to be in order to warrant the replacement of the existing computers with the thin client technology?
b.What would the annual savings have to be in order to warrant the replacement of the existing computers with the thin client technology if the existing computers have no current market value?
Q2) The concept of incremental cost is the same as the concept of differential cost. A)True B)False
Q3) What are the four steps of the total cost method of determining a product selling price?
Q4) Relevant costs are also known as ___________________.
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Chapter 24: Capital Budgeting and Investment Analysis
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Q1) The rate that yields a net present value of zero for an investment is the:
A) Internal rate of return.
B) Accounting rate of return.
C) Net present value rate of return.
D) Zero rate of return.
E) Payback rate of return.
Q2) If the internal rate of return (IRR)of an investment is below the hurdle rate,the project should be accepted.
A)True
B)False
Q3) Lower-risk investments require a _________________ rate of return compared with higher-risk investments.
Q4) The payback method of evaluating an investment fails to consider how long the investment will generate cash inflows beyond the payback period.
A)True
B)False
Q5) The _______________________________ is computed by discounting the future net cash flows from the investment at the project's required rate of return and then subtracting the initial amount invested.
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Chapter 25: Accounting With Special Journals
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Q1) ____________________ are the means to take information out of an accounting system and make it available to users.
Q2) A schedule of accounts receivable is a listing of all creditor accounts and account balances.
A)True
B)False
Q3) In a typical purchases journal,you would expect to see the following columns:
A) Accounts payable dr.
B) Purchase discounts cr.
C) Accounts receivable cr.
D) Inventory dr. (if perpetual method used).
E) Cost of Goods Sold dr. (if perpetual method used).
Q4) A __________________ is an all-purpose journal that can record any transaction.
Q5) With advanced technology there is no need to trace to its source information that has been entered into an accounting information system.
A)True B)False
Q6) _______________________________________ refers to the programs that help managers direct a company's vital operations.
Page 27
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Chapter 26: Time Value of Money
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Q1) Troy has $105,000 now.He has a loan of $175,000 that he must pay at the end of five years.He can invest his $105,000 at 10% interest compounded semiannually.Will Troy have enough to pay his loan at the end of the five years?
Q2) An _____________ is a series of equal payments occurring at equal intervals.
Q3) The present value of 1 formula is often useful when a borrowed asset must be repaid in full at a later date and the borrower wants to know its worth at the future date.
A)True B)False
Q4) Sandra has a savings account that is now $50,000.She started with $28,225 and earned interest at 10% compounded annually.It took five years to accumulate the $50,000.
A)True B)False
Q5) An interest rate is also called a discount rate.
A)True B)False
Q6) Interest is the borrower's payment to the owner of an asset for its use.
A)True B)False
Page 28
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Chapter 27: Investments and International Operations
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176 Verified Questions
176 Flashcards
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Sample Questions
Q1) A controlling investor is referred to as the parent and the investee company is referred to as the subsidiary.
A)True
B)False
Q2) On April 1 of the current year,a company paid $150,000 to purchase 7%,10-year bonds that had a par value of $150,000 and paid interest semiannually on October 1 and April 1.The company intends to hold the bonds until they mature.Prepare the journal entry to record the receipt of the semiannual interest payment on April 1 of the following year.
Q3) A controlling influence over the investee is based on the investor owning voting stock exceeding:
A) 10%
B) 20%
C) 30%
D) 40%
E) 50%
Q4) Explain how held-to-maturity debt securities are accounted for at and after acquisition and how they are reported in the financial statements.
Q5) Return on total assets is computed by dividing ___________ by __________.
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Chapter 28: Accounting for Partnerships
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126 Verified Questions
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Sample Questions
Q1) Nguyen invested $100,000 and Hansen invested $200,000 in a partnership.They agreed to share income and loss by allowing a $60,000 per year salary allowance to Nguyen and a $40,000 per year salary allowance to Hansen,plus an interest allowance on the partners' beginning-year capital investments at 10%,with the balance to be shared equally.Under this agreement,the shares of the partners when the partnership earns a $105,000 in income are:
A) $52,500 to Nguyen; $52,500 to Hansen.
B) $35,000 to Nguyen; $70,000 to Hansen.
C) $57,500 to Nguyen; $47,500 to Hansen.
D) $42,500 to Nguyen; $62,500 to Hansen.
E) $70,000 to Nguyen; $60,000 to Hansen.
Q2) During the closing process,each partner's withdrawals account is closed to __________________.
Q3) A partnership that has at least two classes of partners,general and limited,that allows the limited partners to have no personal liability beyond the amounts they invest in the partnership,and in which the limited partners have no active role except as specified in the partnership agreement is a ________________________ partnership.
Q4) Partner return on equity is calculated as ______________________________.
Q5) The life of a partnership is ____________________ in duration.
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