Managerial Accounting Practice Exam
Course Introduction
Managerial Accounting introduces students to the concepts, techniques, and tools used by managers to make informed business decisions and effectively control organizational operations. The course covers key topics such as cost behavior, budgeting, performance evaluation, cost-volume-profit analysis, and relevant costing for decision-making. Emphasis is placed on the interpretation and use of accounting information for planning, directing, and controlling business activities within various organizational settings. Through case studies and practical exercises, students learn to apply managerial accounting principles to real-world business challenges, preparing them for strategic roles in management and finance.
Recommended Textbook
Financial Accounting An Introduction to Concepts Methods and Uses 14th Edition by Roman L. Weil
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Chapter 1: Introduction to Business Activities and Overview
of Financial Statements and the Reporting Process
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Sample Questions
Q1) An audit by an independent external auditor usually does not involve which of the following?
A)an assessment of the capability of a firm's accounting system to accumulate, measure, and synthesize transactional data properly.
B)an assessment of the operational effectiveness of the accounting system
C)a determination of whether the financial report complies with the requirements of the applicable authoritative guidance
D)an assessment of the operational economy, efficiency, and effectiveness of the company's operations
E)an assessment of the effectiveness of a firm's internal control system for financial reporting.
Answer: D
Q2) Expenses are:
A)inflows of assets from customers.
B)cash receipts from customers.
C)outflows of assets from generating revenues.
D)cash payments.
E)sensitive to the timing of expenditures.
Answer: C
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Chapter 2: The Basics of Record Keeping and Financial
Statement Preparation: Balance Sheet
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Sample Questions
Q1) The date of the balance sheet appears at the bottom of the balance sheet. A)True
B)False
Answer: False
Q2) C-Swiss, a Swedish firm specializing in communication networks, reported a balance in Inventories of SEK21,500 million at the beginning of 2013 and SEK22,500 million at the end of 2013.During 2013, C-Swiss reported SEK114,100 million in Cost of Sales.How much was C-Swisss' inventory purchases during 2013? [Assume that all of C-Swisss' inventory purchases are made on account and C-Swiss applies IFRS, as well as reports its results in millions of Swedish kronor (SEK).]
A)SEK115,300 million
B)SEK115,200 million
C)SEK115,100 million
D)SEK113,100 million
E)none of the above
Answer: C
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Chapter 3: The Basics of Record Keeping and Financial
Statement Preparation: Income Statement
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129 Verified Questions
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Sample Questions
Q1) Assume that a firm uses the accrual basis of accounting.For each of the following independent cases, indicate the amount of revenue the firm recognizes for the month of August.
a. Collects $2,000 in July for merchandise to be delivered in August.
b. Collects $1,200 in May for subscriptions that will be delivered during the next twelve months (beginning in May).
c. Collects $800 in August for merchandise sold and delivered in July.
d. Collects $2,400 interest on a 6-month certificate of deposit, which matures on August 15th.
e. Sells $3,000 of merchandise on account in August. The firm allows a 2% discount for payment prior to 30 days and customers take the discount.
Answer: a.$2,000
b.$100
c.$0
d.$200
e.$2,940
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Chapter 4: Balance Sheet: Presenting and Analyzing
Resources and Financing
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Sample Questions
Q1) The balance sheet does provides all the information an analyst wants or needs about a firm's resources and the claims on those resources.
A)True
B)False
Q2) The _____ account accumulates the amounts of the undistributed earnings over time.
A)Treasury Stock
B)Cash
C)Additional Paid-in-Capital
D)Retained Earnings
E)Common Stock
Q3) The principal objective of accounting reports as currently prepared is to present ______ the results of operations and the financial condition of the firm.
A)fairly
B)accurately
C)objectively
D)subjectively
E)correctly
Q4) What is conservatism?
Page 6
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Chapter 5: Income Statement: Reporting Results of Operating Activities
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Sample Questions
Q1) Which financial statement reports operating performance for a specific period of time?
A)Balance sheet
B)Income statement
C)Statement of changes in shareholders' equity
D)Statement of retained earnings
E)Statement of Cash Flows
Q2) U.S.GAAP and IFRS require separate income statement display of income from continuing operations and _____earnings that will not continue because the firm either sold, or made a decision to sell, a portion of its business).Such a requirement aids users of the income statement in predicting future earnings.
A)income from discontinued operations
B)extraordinary items
C)changes in accounting principles
D)sale of individual assets
E)none of the above
Q3) Most firms display the components of cost of sales.
A)True
B)False
Q4) What is comprehensive income?
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Chapter 6: Statement of Cash Flows
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Sample Questions
Q1) If cash decreases by $10,000 during the year, liabilities decrease by $5,000, and shareholders' equity increases by $5,000, what is the total change in noncash assets for the year?
A)a decrease of $5,000
B)an increase of $10,000
C)a decrease of $10,000
D)an increase of $5,000
E)an increase of $15,000
Q2) U.S.GAAP classifies all of the following as investing activities on the statement of cash flows except for
A)cash inflows from selling manufacturing equipment.
B)cash outflows from purchasing bonds (intended to be held to maturity) of other entities.
C)cash outflows to lender for interest.
D)cash inflows from selling a (long-term) portfolio of equity securities of other entities.
E)cash outflows from buying manufacturing equipment.
Q3) How does the statement of cash flows explain the reasons for the change in cash between balance sheet dates?
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8
Chapter 7: Introduction to Financial Statement Analysis
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Sample Questions
Q1) The accounts receivable turnover ratio indicates how quickly a firm collects its accounts receivable.
A)True
B)False
Q2) (CMA adapted, Jun 90 #21) Regarding the information for Ramer Company and Matson Company, assume that some of the ratios and data for Ramer and Matson are affected by income taxes.Assuming no interperiod income tax allocation, which of the following items would be directly affected by income taxes for the period?
A)debt-equity ratio and dividend payout ratio
B)current ratio and debt-equity ratio
C)return on investment and earnings per share
D)interest coverage ratio and current ratio
E)none of the above
Q3) Discuss any ethical issues raised by the following actions.
Q4) Discuss how the rate of return on common shareholders' equity is calculated.
Q5) If the firm offers terms of "net 45 days," a days receivable outstanding of 45 days indicates that the firm handles accounts receivable well.
A)True
B)False
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Chapter 8: Revenue Recognition, Receivables, and
Advances From Customers
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Q1) An accounting issue for accounts receivable is measurement of the amount on the balance sheet. With regard to measurement, both U.S.GAAP and IFRS require that sellers report accounts receivable _____.
A)the amount that all customers have agreed to pay
B)at the present value of future cash flows
C)net of the estimated uncollectible amount
D)at the future value of present cash flows
E)plus the estimated uncollectible amount
Q2) U.S.GAAP does not allow sellers of merchandise to recognize revenue from sales when the customers have the right to return goods.
A)unless the firm can reasonably estimate the amount of returns.
B)unless the firm uses an allowance method to do so.
C)unless the firm can reasonably estimate the amount of returns and uses an allowance method to do so.
D)none of the above.
E)all of the above.
Q3) Describe income recognition after the sale when substantial performance remains.
Q4) Describe the accounts receivable recognition process.
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Q5) Briefly explain the difference between a sales allowance and a sales discount.
Chapter 9: Working Capital
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Q1) Inventory by specific identification would not be practical for
A)a large-volume automobile dealer.
B)a rare coin dealer.
C)a TV and stereo superstore.
D)a high cost jeweler.
E)all of the above.
Q2) As time passes, firms gain information about both actual warranty usage and actual warranty expenditures.
A)True
B)False
Q3) How are inventories valued subsequent to acquisition?
Q4) A deferred performance liability arises when a firm agrees to provide a warrantyfor service or repairs for some period after a sale.
A)True
B)False
Q5) Discuss inventory accounting concepts and issues.
Q6) IFRS prohibits use of the LIFO cost-flow assumption.
A)True
B)False
Q7) Describe the concept of working capital.
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Chapter 10: Long-Lived Tangible and Intangible Assets
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Q1) Tangible long-lived assets typically appear under the title Property, Plant, and Equipment, among the current assets.
A)True
B)False
Q2) Under U.S.GAAP and IFRS reporting standards, management assesses the firm's assets for impairment at each reporting date by determining if impairment indicators are present.Impairment indicators do not include
A)the decline in the market value of an asset significantly beyond what would be expected because of use or the passage of time.
B)significant adverse changes in the entity's technological environment.
C)significant adverse changes in the entity's economic environment.
D)significant adverse changes in the entity's legal environment.
E)significant adverse changes in the entity's Chief Executive Officer's health.
Q3) Expenditures for maintenance or repair of tangible long-lived assets are treated as asset improvements and subsequently depreciated.
A)True
B)False
Q4) Describe several issues in the accounting for long-lived assets.
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Page 12
Chapter 11: Notes, Bonds, and Leases
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Q1) Notes, bonds, leases and derivatives are _____.
A)present values of future cash flows
B)financial instruments
C)collateralized debt obligations
D)unsecured debt obligations
E)investment trusts
Q2) Which of the following is/are not one of the conditions of a capital lease?
A)transfer of ownership to the lessor at the end of the lease term
B)transfer of ownership to the lessee appears likely because of a "bargain" purchase option
C)lease extends for at least 75 percent of the asset's life
D)present value of the minimum contractual lease payments equals or exceeds 90 percent of the fair market value of the asset at the time the lessee signs the lease
E)all of the above
Q3) Describe the various methodologies in accounting for leases.
Q4) The term face value refers to the principal amount printed on the face of the bond certificate.
A)True
B)False
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Chapter 12: Liabilities: Off-Balance Sheet Financing,
Benefits, and Income Taxes
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Q1) Many entries in Other Comprehensive Income represent changes in fair value of the pension plan(s) that receives delayed recognition in net income.
A)True
B)False
Q2) U.S.GAAP and IFRS require complex procedures in accounting for income taxes.A deferred tax asset arises when
A)a firm recognizes an expense earlier for financial reporting than for tax reporting.
B)a firm recognizes an expense earlier for tax reporting than for financial reporting.
C)a firm recognizes a revenue earlier for financial reporting than for tax reporting.
D)a firm recognizes a revenue earlier for tax reporting than for financial reporting.
E)none of the above
Q3) Discuss the interpretation of retirement benefit disclosures.
Q4) Describe the accounting for income taxes for financial reporting purposes.
Q5) Describe the accounting for employer sponsored defined benefit pension plans.
Q6) Do firms confront ethical issues when engaging in off-balance-sheet financing?
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Chapter 13: Marketable Securities and Derivatives
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Q1) The U.S.government will pay Allen $2,500,000 each six months, equal to 2.5% of the $100 million face amount of the treasury bonds (5% annual coupon rate, paid in two installments each year), and will repay the $100 million at the end of five years.At the time Allen purchases the bonds, the market prices these bonds to yield Allen 6% annually (3% each six months).The bonds are classified as held to maturity.Because the market requires a _____ than the _____ on the bonds, the bonds will sell on the market for a
A)lower yield; stated interest rate; premium
B)lower yield; market interest rate; premium
C)higher yield; stated interest rate; discount
D)lower yield; stated interest rate; discount
E)market yield; stated interest rate; premium
Q2) A derivative is a financial instrument whose value changes in response to changes in an underlying observable variable, such as a stock price, an interest rate, a currency exchange rate, or a commodity price.
A)True
B)False
Q3) Describe the accounting for a fair value hedge of a recognized asset or liability.
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15
Chapter 14: Intercorporate Investments in Common Stock
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Sample Questions
Q1) The accounting for investments in common stock depends on the A)expected holding period.
B)purpose of the investment, as determined by the percentage held.
C)purpose of the investment, as determined by management intent.
D)all of the above
E)none of the above
Q2) Assume that P uses the equity method of accounting for its investment in S.Solve for the unknown in each of the following independent cases: \(\begin{array}{llll}&\text { CASEA } & \text { CASE B }& \text { CASE C }\\
\text { P's ownership of S } & \text { A } & 30 \% & 40 \% \\
\text { Investment in beginning of year } & \$ 100 & \text { B } & \$ 130 \\
\text { Investment in end of year } & 105 & \$ 128 & \text { C } \\
\text { S's income (loss) } & 100 & 90 & 40 \\
\text { S's dividends paid } & 80 & 30 & 20 \end{array}\)
Q3) Describe the limitations of consolidated statements.
Q4) What is a noncontrolling interest in a consolidated subsidiary?
Q5) What are qualifying special purpose entities?
Q6) Describe the accounting for minority, active investments.
Q7) Describe the accounting and reporting of investments in common stock.
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Chapter 15: Shareholders Equity: Capital Contributions and Distributions
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Sample Questions
Q1) A firm must pay all current and previously postponed preferred dividends before it can pay any dividends on common shares, thus the preferred shares have the feature called
A)convertible dividend rights.
B)noncumulative dividend rights.
C)cumulative dividend rights.
D)callable dividend rights.
E)participating dividend rights.
Q2) Which of the following is/are true regarding a reverse stock split?
A)Firms reduce the number of outstanding shares by increasing the par value of the stock.
B)Firms reduce the number of outstanding shares by canceling outstanding shares.
C)A reverse stock split usually increases the market value per share in inverse proportion to the reverse split.
D)Managers and governing boards might use reverse stock splits to keep the market price per share within some target trading range.
E)all of the above
Q3) Discuss the various laws and contracts that govern the rights and obligations of a shareholder.
Page 17
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Chapter 16: Statement of Cash Flows: Another Look
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Q1) During Year 3, investors in bonds of Kline Corporation exercised their option to convert their debt securities into shares of common stock.The entry made in the accounting records to record the conversion is as follows:
Bonds Payable ...................................3,000
Common Stock ....................................1,000 Additional Paid-in Capital ............................2,000
The transaction requires
A)inclusion in the statement of cash flows as an operating activity, only.
B)inclusion in the statement of cash flows as an investing activity, only.
C)inclusion in the statement of cash flows as a financing activity, only.
D)disclosure in a supplementary schedule or notes to the financial statements.
E)disclosure in managements' discussion and analysis.
Q2) The last step in the accounting record-keeping process is preparing the statement of cash flows from balance sheet amounts and from details of transactions affecting the cash account.
A)True B)False
Q3) Describe the effects of transactions involving investments on the statement of cash flows.
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Page 18
Chapter 17: Synthesis and Extensions
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Sample Questions
Q1) Earnings per share of common stock (assuming no convertible or other potentially dilutive securities outstanding)
A)equals net income attributable to common stock divided by the weighted average number of common shares outstanding during the period.
B)equals net income attributable to common stock divided by the number of common shares outstanding at the beginning of the period.
C)equals net income attributable to common stock divided by the number of common shares outstanding at the end of the period.
D)all of the above.
E)none of the above.
Q2) One firm may have a lower earnings per share simply because it has a
A)smaller dollar amount of common and preferred shares outstanding.
B)smaller number of common shares outstanding.
C)larger number of common shares outstanding.
D)smaller number of common and preferred shares outstanding.
E)larger number of common and preferred shares outstanding.
Q3) Describe the calculation of earnings and book value per share.
Q4) How do firms account for goodwill?
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Page 19