Managerial Accounting Practice Exam
Course Introduction
Managerial Accounting focuses on the analysis, interpretation, and use of accounting information by managers within organizations to aid in decision-making, planning, and control. The course covers topics such as budgeting, cost-volume-profit analysis, performance evaluation, and the use of internal financial statements. Students learn how managerial accounting tools can be used to support strategic decision-making, resource allocation, and operational management, as well as how to measure and evaluate organizational performance for goal achievement.
Recommended Textbook Financial Accounting A Business Process Approach 3rd Edition by Jane L. Reimers
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11 Chapters
2570 Verified Questions
2570 Flashcards
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Page 2
Chapter 1: Business: Whats It All About
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Sample Questions
Q1) Target is an example of a ________.
A)sole proprietorship
B)partnership
C)corporation
D)not-for-profit
Answer: C
Q2) A financial statement that presents the changes in shareholder's equity for an accounting period.
A)Statement of cash flows
B)Balance sheet
C)Income statement
D)Statement of changes in shareholders' equity
Answer: D
Q3) Team Shirts,Inc.repays a $2,000 loan.This transaction ________.
A)causes total assets to increase
B)causes total liabilities to decrease
C)is an investing activity
D)causes total shareholders' equity to increase
Answer: B
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Chapter 2: Qualities of Accounting Information
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Sample Questions
Q1) Clean Sweep contracted to clean an office building in July for $1,500.The work was contracted in July.The building was completely cleaned in August and Clean Sweep received a payment of $500.The remaining payment of $1,000 was received in September.Discuss how this event would be reported in the monthly financial statements for July,August and September.
Answer: The financial records were not affected in July because there was no completed transaction.For the month ended August 31,the income statement would report revenue of $1,500; the statement of cash flows would report cash collected from customers of $500; and the balance sheet at August 31 would report an account receivable of $1,000.In September,the income statement would report no revenue; the statement of cash flows would report cash collected from customers of $1,000; and the balance sheet would show no account receivable.
Q2) The IRS developed GAAP,or generally accepted accounting principles,for the accounting profession.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Accruals and Deferrals: Timing Is
Everything in Accounting
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Sample Questions
Q1) Enoch,Inc.began operations on July 1,2011.On August 1,it received $12,000 in advance for services to be performed evenly over the next 12 months.How much unearned revenue should the company report on its balance sheet at August 31,2011?
A)$12,000
B)$1,000
C)$11,000
D)$5,000
Answer: C
Q2) Maxine,Inc.bought a machine on January 1,2012 for $48,000.The machine is expected to last for 8 years,after which it will be worthless.How much depreciation expense will Maxine show on its balance sheet at December 31,2012?
A)$48,000
B)$8,000
C)$6,000
D)$0.Depreciation expense does not appear on the balance sheet.
Answer: D
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Chapter 4: Payment for Goods and Services: Cash and Accounts Receivable
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Sample Questions
Q1) Comparing a company's cash balance in its accounting records with the bank statement is called ________.
A)a bank reconciliation
B)an external audit
C)an internal audit
D)adjusting the books
Q2) When reporting accounts receivable,the amount reported should be ________.
A)the accounts receivable collected during the period
B)the amount of accounts receivable that a company expects to collect
C)the accounts receivable charged for the current month
D)the amount of accounts receivable minus credit card expense
Q3) Which of the following statements is FALSE?
A)The allowance method is a GAAP method.
B)The direct write-off method violates the matching principle.
C)Under the direct write-off method,accounts are expensed when they are identified as uncollectible.
D)Under the allowance method,amounts written off are recorded as bad debts expense.
Q4) Discuss how the segregation of duties serves as a major control for safeguarding cash.
Page 6
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Chapter 5: The Purchase and Sale of Inventory
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Sample Questions
Q1) The gross profit ratio is the most useful way to determine if a merchandising company is selling its inventory effectively.
A)True
B)False
Q2) McDonald's gross profit ratio is higher than The Boeing Company.
A)True
B)False
Q3) Describe the operating cycle for a merchandising firm.
Q4) Assume that Tango Company had a beginning inventory of 100 units at a cost of $2.00 per unit.Current period purchases were 400 units at a cost of $4.00 per unit.The weighted average cost of each unit is $3.
A)True
B)False
Q5) LIFO is the cost flow method that attaches the last-in costs to the units sold. A)True B)False
Q6) Sales returns and allowances is a contra-asset account.
A)True
B)False
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Chapter 6: Acquisition and Use of Long-Term Assets
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Sample Questions
Q1) On January 1,2011,Ace Electronics paid $400,000 cash for a computer that would be used to store and process its accounting information.The computer has a 5-year useful life,after which it will be worthless because it will be obsolete.What should Ace Electronics report on its Statement of Cash Flows for the year ended December 31,2011?
A)$(400,000)cash paid for investing activities
B)$(400,000)cash paid for financing activities
C)$(80,000)cash paid for depreciation
D)$(400,000)cash paid for operating activities
Q2) Which statement below is TRUE about the cost principle?
A)The cost principle says that all costs associated,directly or indirectly,with buying and using a long-term asset should be permanently capitalized.
B)The cost principle says that all costs reasonable and necessary to place an asset into a working condition should be capitalized.
C)The cost principle says that all costs associated with purchasing a long-term asset should be expensed in the period of the purchase.
D)The cost principle says that only the cash paid to acquire a long-term asset should be capitalized.
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Chapter 7: Accounting for Liabilities
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Sample Questions
Q1) An employee's gross pay is recorded as an expense on the employer's books.
A)True
B)False
Q2) On January 1,2011,Alpha Company issued $1,000,000 of 5%,20-year bonds to buy a new computerized accounting system.The market rate of interest was 6%.The bonds pay interest annually on December 31.How much cash did Alpha receive when the bonds were sold?
A)$1,000,000
B)$1,124,622.60
C)$885,296
D)$950,386
Q3) What is an annuity?
Q4) In December 2011,B.Rich worked for Payless,Inc.and earned $10,000.Federal income tax withholding is 20%.The FICA rate is 6.2% and the Medicare tax is 1.45%.What is B.Rich's gross pay?
A)$12,000
B)$12,765
C)$13,385
D)$10,000
Q5) What is a bond,and why do companies issue bonds?
Page 9
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Chapter 8: Accounting for Shareholders Equity
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Sample Questions
Q1) In exchange for stock,corporations may receive ________.
A)earnings
B)cash or other assets
C)income
D)treasury stock
Q2) The owners of common stock do NOT have the specific right to ________.
A)vote for members of the board of directors
B)share in the corporation's earnings
C)share in any assets left when a company declares bankruptcy
D)receive dividends before preferred shareholders
Q3) Which of the following will cause total shareholders' equity to decrease?
A)issuing common stock
B)selling treasury stock
C)repaying a bond's principal
D)purchasing treasury stock
Q4) Dividends ________.
A)cause retained earnings to decrease
B)are expenses and cause shareholders' equity to decrease
C)cause retained earnings to increase
D)are expenses and cause shareholders' equity to increase
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Chapter 9: Preparing and Analyzing the Statement of Cash Flows
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Sample Questions
Q1) If a company were to manipulate the statement of cash flows to please analysts,it would most likely report cash received ________.
A)from the sale of stock as cash from the sale of intangible assets
B)from the sale of intangible assets as cash from the sale of capital assets
C)from loans as cash collected from customers
D)from the sale of land as cash received from the issuance of stock
Q2) The only difference between the direct and indirect methods used for the preparation of the statement of cash flows is the way cash from operating activities is calculated.
A)True
B)False
Q3) Cash budgets are required by ________.
A)U)S.GAAP
B)IFRS
C)both U.S.GAAP and IFRS
D)neither U.S.GAAP nor IFRS
Q4) Explain the differences between operating,investing,and financing activities.
Q5) Explain how the operating activities section of the statement of cash flows is prepared using the indirect method.
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Chapter 10: Using Financial Statement Analysis to Evaluate
Firm Performance
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Sample Questions
Q1) Which financial statement(s)do you need to calculate the debt-to-equity ratio?
A)only the income statement
B)only the balance sheet
C)both the income statement and the balance sheet
D)both the statement of cash flows and the income statement
Q2) Profitability ratios are used to determine whether or not a ________.
A)company's stock is a good investment
B)company can earn a satisfactory rate of return
C)company can pay its bills on time
D)company can survive over a long period of time
Q3) Owning many different stocks is riskier than a large investment in a single company.
A)True
B)False
Q4) The current ratio is a ________ ratio.
A)liquidity
B)solvency
C)profitability
D)market indicator
Q5) What is horizontal analysis?
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Chapter 11: Quality of Earnings, corporate Governance, and Ifrs
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Sample Questions
Q1) Which of the following is evidence of a company's positive ethical climate?
A)Alpha Company's chief financial officer has a degree in drivers' education.
B)Beta Company has a hotline where anonymous callers can leave information about any fraudulent activity in Beta Company.
C)Gamma Company provides free health insurance only for employees who earn more than $100,000 a year.Hourly workers are not eligible for company health insurance even if they are willing to pay for it themselves.This saves the company a lot of money in employee benefits.
D)To ensure the statements are prepared properly,the company pays its external auditors extra to prepare its financial statements as well as audit them.
Q2) The management of Snake,Inc.was having a bad year and decided to include numerous big bath charges in an already bad year.What effect would this have on the company's earnings per share this year? What effect would this have on future years' earnings per share? Is this ethical?
Q3) Discuss the difference between U.S.GAAP and IFRS in terms of rule-based versus principle-based approaches to accounting.
Q4) Describe how IFRS differ from U.S.GAAP in accounting for impairments of long-term assets.
Page 13
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