Managerial Accounting Mock Exam
Course Introduction
Managerial Accounting is a course designed to equip students with the principles and techniques used by managers to make informed business decisions. Emphasizing internal business operations, the course explores topics such as cost behavior, budgeting, performance evaluation, and financial planning. Students will learn how to analyze accounting data, prepare management reports, and utilize tools such as variance analysis, job costing, and activity-based costing. Through case studies and practical exercises, the course fosters critical thinking and problem-solving skills, empowering students to contribute to effective and strategic management within organizations.
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Financial and Managerial Accounting 8th Edition by
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Page 2
John J Wild
Chapter 1: Accounting in Business
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Sample Questions
Q1) The assets of a company total $700,000; the liabilities,$200,000.What is the amount of equity?
A)$900,000.
B)$700,000.
C)$500,000.
D)$200,000.
E)It is impossible to determine unless the amount of the stock issuances is known.
Answer: C
Q2) The accounting equation for Ying Company shows a decrease in its assets and a decrease in its equity.Which of the following transactions could have caused that effect?
A)Cash was received from providing services to a customer.
B)The company paid an amount due on credit.
C)Equipment was purchased for cash.
D)A utility bill was received for the current month,to be paid in the following month.
E)Advertising expense for the month was paid in cash.
Answer: E
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3
Chapter 2: Accounting for Business Transactions
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Sample Questions
Q1) When cash is received from a stockholder in exchange for common stock,the transaction is recorded by debiting Cash and crediting a(n):
A)Asset account.
B)Equity account.
C)Revenue account.
D)Expense account.
E)Liability account.
Answer: B
Q2) Identify the accounts that would normally have balances in the credit column of a business's trial balance
A)Liabilities and expenses.
B)Assets and revenues.
C)Revenues and expenses.
D)Revenues and liabilities.
E)Dividends and liabilities.
Answer: D
Q3) ________ and ________ are the starting points for the analyzing and recording process.
Answer: Business transactions; Events
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Page 4
Chapter 3: Adjusting Accounts for Financial Statements
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Sample Questions
Q1) In the process of completing a work sheet,the accountant determines that the Income Statement debit column totals $83,000,while the Income Statement credit column totals $65,000.To enter net income (or net loss)for the period into the work sheet would require an entry to
A)the Adjustments debit column and the Adjustments credit column.
B)the Unadjusted Trial Balance debit column and the Adjustments credit column.
C)it is not practical to enter Net Income (or Net Loss)on the work sheet.
D)the Balance Sheet & Statement of Retained Earnings debit column and the Income Statement credit column.
E)the Income Statement debit column and the Balance Sheet & Statement of Retained Earnings credit column.
Answer: D
Q2) Depreciation measures the decline in market value of an asset.
A)True
B)False
Answer: False
Q3) ________ are required at the end of the accounting period because certain internal transactions and events remain unrecorded.
Answer: Adjusting entries
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Page 5
Chapter 4: Accounting for Merchandising Operations
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Sample Questions
Q1) A company purchases merchandise with a catalog price of $20,000.The company receives a 35% trade discount from the seller.The seller also offers credit terms of 2/10,n/30.Assuming no returns were made and that payment was made within the discount period,what is the net cost of the merchandise?
A)$13,720.
B)$19,600.
C)$6,860.
D)$13,000.
E)$12,740.
Q2) Farmen Company had net sales of $600,000 and cost of goods sold of $450,000.Calculate Farmen's gross profit.
Q3) Cost of goods sold represents the expense of buying and preparing merchandise for sale.
A)True
B)False
Q4) Cost of goods sold is also called cost of sales.
A)True
B)False
Q5) Beginning inventory plus the net cost of purchases is the ________.
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Chapter 5: Inventories and Cost of Sales
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Sample Questions
Q1) A company's cost of inventory was $219,500.Due to phenomenal demand the market value of its inventory increased to $221,700.This company should record the inventory at its market value.
A)True
B)False
Q2) Buffalo Company reported a December 31 ending inventory balance of $412,000.The following additional information is also available: -The ending inventory balance of $412,000 did not include goods costing $48,000 that were purchased by Buffalo on December 28 and shipped FOB destination on that date.Buffalo did not receive the goods until January 2 of the following year.
-The ending inventory balance of $412,000 included damaged goods at their original cost of $38,000.The net realizable value of the damaged goods was $10,000.
Based on this information,the correct balance for ending inventory on December 31 is:
A)$374,000
B)$384,000
C)$460,000
D)$422,000
E)$438,000
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Page 7
Chapter 6: Cash,fraud,and Internal Controls
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Sample Questions
Q1) Petty cash reimbursement requires a journal entry that involves a debit to the appropriate expenses and a credit to Cash.
A)True
B)False
Q2) A properly designed internal control system:
A)Lowers the company's risk of loss.
B)Insures profitable operations.
C)Eliminates the need for an audit.
D)Requires the use of non-computerized systems.
E)Is not necessary if the company uses a computerized system.
Q3) When evaluating the days' sales uncollected ratio,generally the higher the receivables balance,the better the ratio.
A)True
B)False
Q4) On June 1,a company established a $75 petty cash fund.On June 27,the petty cash fund contains $5.25 in cash and the following paid petty cash receipts: postage,$19.50; office supplies,$36.25; and miscellaneous expense $14.00.Give the general journal entry to reimburse the fund on June 27.
Q5) Define an internal control system and describe its purpose.
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Chapter 7: Accounting for Receivables
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Q1) The notes receivable account of a business should include both the notes that have not yet matured and the dishonored notes.
A)True
B)False
Q2) What is the accounts receivable turnover ratio? How is it calculated and how is it used to assess financial condition?
Q3) As long as a company accurately records total credit sales information,it is not necessary to have separate accounts for specific customers.
A)True
B)False
Q4) A note that the maker does not pay at maturity is called a dishonored note.
A)True
B)False
Q5) Notes receivable are classified as current liabilities regardless of the time to maturity.
A)True
B)False
Q6) ________ refers to the expected proceeds from converting an asset into cash.
Q7) The accounts receivable turnover is calculated by dividing ________ by
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Chapter 8: Accounting for Long-Term Assets
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Sample Questions
Q1) Capital expenditures,also called balance sheet expenditures,are additional costs of plant assets that provide benefits extending beyond the current period.
A)True
B)False
Q2) On January 1,2016,a company disposed of equipment for $16,200 cash that had cost $35,000,a salvage value of $5,000,and a useful life 10 years.The double-declining-balance depreciation method was used.On December 31,2015,accumulated depreciation was $20,664.Prepare a journal entry to record the disposal of the equipment.
Q3) The first step in accounting for an asset disposal is to calculate the gain or loss on disposal.
A)True
B)False
Q4) A patent is an exclusive right granted to its owner to manufacture and sell a patented item or to use a process for 20 years.
A)True
B)False
Q5) What is depreciation of plant assets? What are the factors necessary in computing depreciation?
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Chapter 9: Accounting for Current Liabilities
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Sample Questions
Q1) On January 31,Ransom Company's payroll register showed that its employers earned $30,320 of office salaries and $82,750 of sales salaries.Withholdings from the employees' salaries include FICA Social Security taxes as the rate of 6.2%,FICA Medicare taxes at the rate of 1.45%,$16,960 of federal income taxes,$3,350 of medical insurance deductions (which represents 50% of the total cost of the employee medical insurance),and $4,210 of 401(k)retirement contribution deductions.Ransom Company pays the other 50% of the employee insurance cost and matches the employee 401(k)contributions.Several employees earned more than $7,000 for the period which reduced salaries subject to unemployment to $104,000.No employees exceeded the FICA-Social Security taxable wage base.
1.Prepare the journal entry to record Ransom Company's January 31 payroll expenses and liabilities.
2.Prepare the journal entry to record Ransom Company's employer payroll taxes resulting from the January 31 payroll.Ransom's merit rating reduces its state unemployment (SUTA)to 5.4% of the first $7,000 paid each employee.The federal unemployment tax (FUTA)rate is 0.6%.
3.Prepare the journal entry to record Ransom's additional employee expenses.
Q2) What are estimated liabilities? Cite at least two examples and explain why they are classified as estimated liabilities.
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11
Chapter 10: Accounting for Long-Term Liabilities
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Sample Questions
Q1) A company issued 10-year,9% bonds with a par value of $500,000 when the market rate was 9.5%.The company received $484,087 in cash proceeds.Using the straight-line method,prepare the issuer's journal entry to record the first semiannual interest payment and the amortization of any bond discount or premium.(Round amounts to the nearest whole dollar)
Q2) A company issues 8% bonds with a par value of $40,000 at par on January 1.The market rate on the date of issuance was 7%.The bonds pay interest semiannually on January 1 and July 1.The cash paid on July 1 to the bond holder(s)is:
A)$3,200.
B)$2,800.
C)$1,600.
D)$1,400.
E)$0.
Q3) Return on equity increases when the expected rate of return from the acquired assets is higher than the interest rate on the debt issued to finance the acquired assets.
A)True
B)False
Q4) An ________ is an obligation requiring a series of payments to the lender.
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Page 12
Chapter 11: Corporate Reporting and Analysis
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Sample Questions
Q1) A debit balance in retained earnings is referred to as a retained earnings deficit.
A)True
B)False
Q2) The dividend yield is computed by dividing:
A)Annual cash dividends per share by earnings per share.
B)Earnings per share by cash dividends per share.
C)Annual cash dividends per share by the market value per share.
D)Par value per share by cash dividends per share.
E)Cash dividends per share by retained earnings.
Q3) Calculate the balance in Paid-in Capital,Treasury Stock,on September 1 assuming its beginning-year balance is zero.
Q4) Book value per share:
A)Reflects the value per share if a company is liquidated at balance sheet amounts.
B)Is assets divided by equity.
C)Is assets divided by the number of common shares outstanding.
D)Measures the current market value assets.
E)Is equal to par value per share.
Q5) Stock that has been issued and is held by stockholders is ________ stock.
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Chapter 12: Reporting Cash Flows
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Sample Questions
Q1) A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash.The amount that should be reported as a source of cash under cash flows from investing activities is:
A)$50,000.
B)$5,000.
C)$45,000.
D)Zero.This is an operating activity.
E)Zero.This is a financing activity.
Q2) An example of a transaction that must be disclosed as a noncash investing and financing activity includes all but which of the following?
A)The retirement of debt by issuing equity stock.
B)A transaction exchanging cash equivalents for cash.
C)The leasing of assets in a long-term lease transaction.
D)The purchase of noncash assets in exchange for equity or debt securities.
E)The purchase of long-term assets financed by issuing a note or bond.
Q3) What are the steps involved in the preparation of the statement of cash flows?
Q4) The payment of cash dividends never changes the balance of retained earnings.
A)True
B)False
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Chapter 13: Analysis of Financial Statements
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Sample Questions
Q1) Identify and describe three common tools of financial statement analysis.
Q2) Trend analysis is computing percents that show patterns in data across periods.
A)True
B)False
Q3) The debt ratio,the equity ratio,debt-to-equity ratio,and times interest earned are all ________ ratios.
Q4) A ratio expresses a relation between two amounts and can be expressed as a percent,rate,or proportion.
A)True
B)False
Q5) Vertical analysis is used to reveal patterns in data covering two or more successive periods.
A)True
B)False
Q6) Vertical analysis is the comparison of a company's financial condition and performance across time.
A)True
B)False
Q7) Identify and explain the four building blocks of financial statement analysis.
Q8) Describe ratio analysis including its purpose,application,and interpretation.
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Chapter 14: Managerial Accounting Concepts and Principles
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Sample Questions
Q1) Which of the following is not part of the production activity in the flow of manufacturing activities?
A)Beginning Work in Process Inventory.
B)Cost of goods manufactured.
C)Direct labor.
D)Factory overhead.
E)Total finished goods available for sale.
Q2) ________ rejects the notions of "good enough" or "acceptable" and challenges employees and managers to continuously experiment with new and improved business practices.
Q3) A cost can be classified as either ________ or ________based how it changes,in total,with changes in the volume of activity.
Q4) A National Quality Award that encourages an emphasis on quality was established by:
A)The United Nations.
B)The U.S.Chamber of Commerce.
C)The Malcolm Baldrige Foundation.
D)The U.S.Congress.
E)The SEC.
Page 16
Q5) Define fraud and give at least two examples of employee fraud.
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Chapter 15: Job Order Costing and Analysis
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Q1) Job order costing would be appropriate for companies that produce training films for a specific customer or custom-made furniture.
A)True
B)False
Q2) Actual factory overhead incurred in a job costing system is debited to a Factory Overhead general ledger account and credited to various other accounts.
A)True
B)False
Q3) An example of direct labor cost is:
A)Supervisor salary
B)Maintenance worker wages
C)Janitor wages
D)Product assembler wages
E)Accountant salary
Q4) A company that produces products individually designed to meet the needs of a specific customer,would normally use a job order costing system.
A)True
B)False
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Chapter 16: Process Costing and Analysis
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Q1) A system of accounting in which costs are accumulated and then measured per unit at the end of a period by combining costs per equivalent unit from various departments is a:
A)General cost accounting system.
B)Process costing system.
C)Job order cost accounting system.
D)Manufacturing cost accounting system.
E)Work in Process accounting system.
Q2) Process costing is applied to operations with repetitive production and noncustomized products.
A)True
B)False
Q3) Equivalent units of production is an engineering term used to describe the process by which one company attempts to manufacture units of a product that are equivalent to the product manufactured by a competitor.
A)True
B)False
Q4) The use of process costing is of little benefit to a service provider. A)True
B)False
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Chapter 17: Activity-Based Costing and Analysis
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Q1) Overhead costs are often affected by many issues and are frequently too complex to be explained by any one factor.
A)True
B)False
Q2) Activities causing overhead cost in an organization are typically separated into four levels: (1)direct activities,(2)indirect activities,(3)batch level activities,and (4)facility level activities.
A)True
B)False
Q3) Plantwide overhead rates typically do a better job of matching each department's overhead costs to the products using the department's resources than do departmental overhead rates.
A)True B)False
Q4) When products differ in batch size and complexity,they usually consume different amounts of overhead resources.
A)True
B)False
Q5) Allocated overhead ________ vary depending upon the allocation method used.
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Chapter 18: Cost Behavior and Cost-Volume-Profit Analysis
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Q1) The variable costing method is required for external financial reporting.
A)True
B)False
Q2) During its most recent fiscal year,Dover,Inc.had total sales of $3,200,000.Contribution margin amounted to $1,500,000 and pretax income was $400,000.What amount should have been reported as fixed costs in the company's contribution margin income statement for the year?
A)$1,900,000.
B)$2,800,000.
C)$1,300,000.
D)$1,100,000.
E)$1,700,000.
Q3) As production volume activity increases,variable cost per unit remains constant. A)True
B)False
Q4) A product has a contribution margin per unit of $17 and sells at $25 per unit.If the break-even point is 82,000 units,calculate (a)the variable costs per unit and (b)the total fixed costs.
Q5) ________ is a statistical method of identifying an estimated line of cost behavior.
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Chapter 19: Variable Costing and Analysis
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Q1) Under absorption costing,which of the following statements is not true?
A)Over production and inventory buildup can occur because of how managers are evaluated and rewarded.
B)The fixed costs per unit decline as more units are produced.
C)Variable inventory costs are treated in the same manner as they are under variable costing.
D)Fixed inventory costs are treated in the same manner as they are under variable costing.
E)All manufacturing costs are assigned to products.
Q2) Given Advanced Company's data,and the knowledge that the product is sold for $50 per unit and operating expenses are $200,000,compute the net income under absorption costing.
A)$55,000
B)$67,500
C)$80,500
D)$122,500
E)$205,000
Q3) The bottom line of a contribution margin report is net income.
A)True
B)False
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Chapter 20: Master Budgets and Performance Planning
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Q1) The most useful budget figures are developed:
A)From the "top-down".
B)From the "bottom-up" following a participatory process.
C)By the budget committee.
D)By the CEO.
E)After the accounting period has begun.
Q2) Which of the following is not a result of following a well-designed budgeting process?
A)Improved decision-making processes.
B)Improved performance evaluations.
C)Improved coordination of business activities.
D)Assurance of future profits.
E)Improved communication of management's action plans.
Q3) The budgeted cost of direct material B during May should be:
A)$576.
B)$3,708.
C)$552.
D)$2,016.
E)$2,844.
Q4) What are rolling budgets? Why are rolling budgets prepared?
Page 22
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Chapter 21: Flexible Budgets and Standard Costs
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Q1) Compute the variable overhead cost variance.
A)$18,000 favorable.
B)$4,000 favorable.
C)$18,000 unfavorable.
D)$18,300 favorable.
E)$14,300 unfavorable.
Q2) Based on predicted production of 25,000 units,FreshCo.anticipates $175,000 of fixed costs and $137,500 of variable costs.What are the flexible budget amounts of total costs for 20,000 and 30,000 units?
Q3) A fixed budget performance report never provides useful information for evaluating variances.
A)True
B)False
Q4) Lavoie Company planned to use 18,500 pounds of material costing $2.50 per pound to make 4,000 units of its product.In actually making 4,000 units,the company used 18,800 pounds that cost $2.54 per pound.Calculate the direct materials price variance.
Q5) A standard that takes into account the reality that some loss usually occurs with any process under normal application of the process is known as a ________ standard.
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Page 23
Chapter 22: Performance Measurement and Responsibility Accounting
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Q1) Allocating joint costs to products using a value basis method is based on their relative:
A)Sales values.
B)Direct costs.
C)Gross margins.
D)Total costs.
E)Variable costs.
Q2) No standard rule identifies the best basis of allocating expenses across departments.
A)True
B)False
Q3) What is the total advertising expense allocated to Department B?
A)$30,000.
B)$ 9,000.
C)$12,500.
D)$10,800.
E)$7,500.
Q4) A ________ helps control costs and expenses and evaluates managers' performance by assigning costs and expenses to the managers responsible for controlling them.
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Chapter 23: Relevant Costing for Managerial Decisions
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Q1) A ________ is the combination of products sold by a company.
Q2) Logan Company can sell all of the standard and premier products they can produce,but it has limited production capacity.It can produce 6 standard units per hour or 4 premier units per hour,and it has 36,000 production hours available.Contribution margin per unit is $24 for the standard product and $30 for the premier product.What is the most profitable sales mix for Logan Company?
A)0 standard units and 144,000 premier units.
B)180,000 standard units and 24,000 premier units.
C)216,000 standard units and 0 premier units.
D)36,000 standard units and 120,000 premier units.
E)120,000 standard units and 64,000 premier units.
Q3) Chang Industries has 2,000 tables that cost $115 each to produce.Each table can be sold as is for $221 or finished with a stain or paint.The cost to add a finish to each table is $75.Finished tables can be sold for $310.Chang should:
A)Finish the table for incremental cost of $190 per table.
B)Sell the unfinished tables for profit of $195 per table.
C)Finish the table for profit of $89 per table.
D)Sell unfinished tables for $106 incremental revenue per table.
E)Finish the table for profit of $14 per table.
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Chapter 24: Capital Budgeting and Investment Analysis
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Q1) An advantage of the break-even time (BET)method over the payback period method is that it recognizes the time value of money.
A)True
B)False
Q2) Which investment should Alfarsi choose?
A)Only Investment A is acceptable.
B)Only Investment B is acceptable.
C)Both investments are acceptable,but A should be selected because it has the greater net present value.
D)Both investments are acceptable,but B should be selected because it has the greater net present value.
E)Neither machine is acceptable.
Q3) The capital budgeting process involves all of the following except:
A)Having department or plant managers submit new investment proposals.
B)Determining which financial institution to use for financing.
C)Evaluating the submitted proposals.
D)Forming a capital budget committee that includes accounting and finance members.
E)Approving or rejecting new investment proposals.
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Chapter 25: Time Value of Money
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Q1) How long will it take an investment of $25,000 at 6% compounded annually to accumulate to a total of $35,462.50? (PV of $1,FV of $1,PVA of $1,and FVA of $1)\(\bold{\text{(Use appropriate factor(s)from the tables provided.)}}\)
A)4 years
B)5 years
C)6 years
D)2 years
E)10 years
Q2) Interest is the borrower's payment to the owner of an asset,for its use.
A)True B)False
Q3) Explain the concept of the future value of a single amount.
Q4) A company borrows money from the bank by promising to make 6 annual year-end payments of $27,000 each.How much is the company able to borrow if the interest rate is 9%?
Q5) A company has $50,000 today to invest in a fund that will earn 7%.How much will the fund contain at the end of 8 years?
Q6) Explain the concept of the present value of a single amount.
Q7) Explain the concept of the present value of an annuity.
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Chapter 26: Investments
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Q1) On January 2,Year 1,Barber Company purchased 5,000 shares of Convell Company for $60,500.Convell Company has a total of 25,000 shares of common stock outstanding and it is presumed the Barber Company will have a significant influence over Convell.During each of the next two years,Convell declared and paid cash dividends of $0.85 per share,and its net income was $72,000 and $67,000 for Year 1 and Year 2,respectively.What is the book value of Barber's investment in Convell at the end of Year 2?
A)$60,500.
B)$79,800.
C)$52,000.
D)$88,300.
E)$87,300.
Q2) Explain how equity securities having significant influence are accounted for and reported in the financial statements.Include a discussion of the criterion for these securities in terms of an investee's voting stock.
Q3) Long-term investments in debt securities not classified as trading or held-to-maturity securities are classified as available-for-sale securities.
A)True B)False
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Page 28
Chapter 27: Lean Principles and Accounting
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30 Verified Questions
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Sample Questions
Q1) Singh Company manufacturers wheelchairs.Each wheelchair requires $325 of raw materials and $780 of conversion costs.Each wheelchair is sold for $1,500.Last month Singh started 38 wheelchairs and completed 35 wheelchairs.The beginning balance in work in process inventory is zero.The ending balance in work in process inventory is:
A)$2,340.
B)$1,105.
C)$925.
D)$1,315.
E)$975.
Q2) Beake Company has 15 days' sales in work in process inventory based on the current year's cost of goods sold of $11,315.What is Beake's work in process inventory?
A)$310
B)$470
C)$350
D)$465
E)$510
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