Managerial Accounting Practice Questions
Course Introduction
Managerial Accounting focuses on the use of accounting information by managers within organizations to inform decision-making, planning, and control. The course covers key concepts such as cost behavior, budgeting, performance evaluation, variance analysis, and the use of accounting data to facilitate strategic business decisions. Students learn how to analyze financial information, allocate resources efficiently, and develop financial strategies that enhance organizational effectiveness. Emphasis is placed on practical applications and techniques that support managerial responsibilities and operational success.
Recommended Textbook
Horngrens Accounting 10th Edition by Miller Nobles Mattison
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Page 2
Chapter 1: Accounting and the Business Environment
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Sample Questions
Q1) The balance sheet of a business summarizes an entity's revenues and expenses.
A)True
B)False
Answer: False
Q2) The left side of the accounting equation measures the amount that the business owes to creditors and to the owner.
A)True
B)False
Answer: True
Q3) Managerial accounting focuses on information for external decision makers.
A)True
B)False
Answer: False
Q4) Which of the following is a characteristic of a limited-liability company (LLC)?
A)An LLC's life is terminated at any member's choice or death.
B)Each member of an LLC is liable only for his or her own actions.
C)An LLC must have more than five members.
D)The income of members from an LLC is not taxed.
Answer: B
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Chapter 2: Recording Business Transactions
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Sample Questions
Q1) The process of transferring data from the ledger to the journal is called posting.
A)True
B)False
Answer: False
Q2) Which of the following is a liability account?
A)Accounts Receivable
B)Cash
C)Building
D)Notes Payable
Answer: D
Q3) Which of the following is a liability account?
A)Accounts Payable
B)Prepaid Expense
C)Salaries Expense
D)Service Revenue
Answer: A
Q4) A business purchased land for $250,000 cash. Provide the journal entry (debits first, credits second.)
Answer: 11ea8243_0ff7_f722_bbd8_97ff37273226_TB2803_00 Purchased land for cash.
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) Robert Rogers, CPA, performed accounting services for a client in December. A bill was mailed to the client on December 30. Roberts received a check by mail on January 5. As per the revenue recognition principle, the related account that should appear on the balance sheet as of December 31 is:
A)Prepaid Expense.
B)Accounts Receivable.
C)Unearned Revenue.
D)Accounts Payable.
Answer: B
Q2) On January 1, 2014, Smith had a beginning balance in Prepaid Insurance Expense of $1,200. On February 1, 2014, Smith paid an annual insurance premium in the amount of $4,800. On February 28, 2014, the balance in Prepaid Insurance is $2,000. The prepaid expense was initially recorded as an asset.
A)True
B)False
Answer: False
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5
Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Under which of the following categories would Accounts Receivable appear?
A)Current assets
B)Current liabilities
C)Long-term assets
D)Long-term liabilities
Q2) The Salaries Expense account is a temporary account.
A)True
B)False
Q3) The beginning balance in the Capital account of a company was $10,000. The revenues and expenses were $200,000 and $120,000, respectively. The owner withdrew $4,000 during the year. The ending balance in the Capital was $90,000.
A)True
B)False
Q4) Which of the following accounts will be closed by debiting the Income Summary account?
A)Depreciation Expense
B)Accounts Payable
C)Service Revenue
D)Accumulated Depreciation
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Chapter 5: Merchandising Operations
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Sample Questions
Q1) The net income calculated using both the single and multi-step formats of income statement is always the same.
A)True
B)False
Q2) An invoice, with payment terms of 5/10, n/30, was issued on April 28, for $235. If the payment was made on May 12, the amount of payment will be:
A)$235.00.
B)$211.50.
C)$223.25.
D)$230.00.
Q3) In a periodic inventory system, the cost of goods sold account is continuously updated as and when sales occur.
A)True
B)False
Q4) The term "Freight out" refers to:
A)transportation costs on purchases.
B)cost of inventory purchased.
C)costs that are not actually paid in cash.
D)transportation costs on sales.
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Chapter 6: Merchandise Inventory
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Sample Questions
Q1) Henderson Sales sold 400 units of product to a customer on account. The selling price was $28 per unit, and the cost, according to the company's inventory records, was $14 per unit. Provide the journal entry to record cost of goods sold. (Assume a perpetual inventory system)
Q2) Which of the following principles states that a business should never anticipate gains?
A)conservatism
B)materiality concept
C)disclosure principle
D)consistency principle
Q3) The beginning inventory of Soft Toys Company was $46,000. The purchases (excluding returns)and sales revenue for the year were $230,000 and $325,000, respectively. The purchase returns amounted to $30,000. The company's normal gross profit percent is 60%. What is the amount of estimated ending inventory?
A)$72,000
B)$246,000
C)$30,000
D)$116,000
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8
Chapter 7: Accounting Information Systems
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Sample Questions
Q1) Cash disbursement journals are also known as:
A)sales journals.
B)purchases journals.
C)cash receipt journals.
D)cash payments journals.
Q2) Both small and large companies require a big accounting information system. Therefore, the cost of employing an accounting information system is same for both. A)True
B)False
Q3) When a sales journal is posted to the general ledger at the end of the month, the accountant totals the Accounts Receivable DR, Sales Revenue CR and Cost of Goods Sold DR, Merchandise Inventory CR columns. This process is commonly called: A)scalping. B)ticking.
C)footing.
D)framing.
Q4) In a networked system, the server stores the program and the data.
A)True B)False
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Chapter 8: Internal Control and Cash
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Sample Questions
Q1) Which of the following items must be examined by the controller or treasurer before signing a check?
A)the ledger
B)the purchase order
C)the confirmation report
D)the journal entry
Q2) Which of the following would be included in the entry to record the replenishment of a petty cash fund?
A)a credit to Petty cash
B)a debit to Accounts Receivable
C)a credit to Cash
D)a credit to various expenses and assets
Q3) The bank made an EFT payment of a telephone bill of $5,000. How would this information be included on the bank reconciliation?
A)an addition on the bank side
B)a deduction on the book side
C)an addition on the book side
D)a deduction on the bank side
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Chapter 9: Receivables
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Sample Questions
Q1) Dividends receivable, interest receivable, and taxes receivable are commonly categorized as other receivables.
A)True
B)False
Q2) Sales through credit cards and debit cards are journalized in the same way as credit sales are journalized.
A)True
B)False
Q3) Which of the following would be included in the entry by the payee to record a dishonored note receivable?
A)a debit to Accounts Receivable
B)a debit to Interest Revenue
C)a debit to Notes Receivable
D)a credit to Interest Expense
Q4) The maturity value of a note is the sum of the principal minus interest due at maturity.
A)True
B)False
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Chapter 10: Plant Assets, Natural Resources, and Intangibles
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Sample Questions
Q1) In exchanges of plant assets with commercial substance, the new asset received will be recorded at its market value.
A)True
B)False
Q2) Which of the following is true of goodwill?
A)Goodwill must be capitalized when acquired, and amortized over 7 years or less.
B)Both created and acquired goodwill must be recorded in the books.
C)Goodwill must be expensed when acquired.
D)Goodwill is not amortized.
Q3) Cost of an asset is $1,000,000 and its residual value is $100,000. Estimated useful life of the asset is four years. Calculate depreciation for the second year using the double-declining-balance method of depreciation.
A)$250,000
B)$225,000
C)$450,000
D)$240,000
Q4) Give journal entry to record the acquisition of a plant asset for cash.
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Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) Which of the following columns is included in a typical payroll register?
A)Direct labor hours worked
B)Warranties Payable
C)Current Period Earnings
D)Sales Tax
Q2) Steve's gross pay for the week is $980. His yearly pay is under the limit for OASDI. Assume that the rate for state and federal unemployment compensation taxes is 6.2%, and that Steve's pay year-to-date has previously exceeded the $7,000 cap. His yearly pay is under the limit for OASDI. How much is the total amount of payroll taxes that Steve'e employer must record as payroll tax expenses? (Do not round your intermediate calculations. Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)
A)$60.76
B)$41.16
C)$94.53
D)$74.97
Q3) Unearned revenues relating to a one-year service contract are current liabilities until they are earned.
A)True
B)False
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Page 13
Chapter 12: Partnerships
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Sample Questions
Q1) Which of the following statements is true of partnership?
A)If the partners have no partnership agreement specifying how to divide profits and losses, then they share equally.
B)It is legally required to share the profit and losses equally, irrespective of the partnership agreement.
C)The stated ratio of profit sharing needs to be approved by the SEC.
D)The profit sharing is always based on each partner's capital balances and any losses will be shared equally.
Q2) Which of the following is true if a withdrawing partner may receive assets worth more than the book value of his or her equity?
A)an increase in the remaining partners' capital accounts
B)no change to the remaining partners' capital accounts
C)a premium to existing partners
D)a bonus to the withdrawing partner
Q3) Which of the following businesses is most likely to be organized as an LLP?
A)a bookstore run by two partners
B)an international retail chain
C)an accounting firm run by two partners
D)a stationery store owned by an individual
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Page 14
Chapter 13: Corporations
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Sample Questions
Q1) Restrictions on retained earnings:
A)require adjusting journal entries.
B)are usually reported in the notes to the financial statements.
C)are reported on the income statement.
D)are designed to maximize dividends paid to shareholders.
Q2) On November 1, 2015, Oster Company declared a dividend of $3.00 per share. Oster Company has 20,000 shares of common stock outstanding and no preferred stock. Which of the following is the journal entry needed to record the declaration of dividends?
A)Debit Dividends Payable-Common $60,000 and credit Retained Earnings $60,000.
B)Debit Retained Earnings $60,000 and credit Cash $60,000.
C)Debit Retained Earnings $60,000 and credit Dividends Payable-Common $60,000.
D)Debit Cash $60,000 and credit Dividends Payable-Common $60,000.
Q3) Treasury stock is a:
A)contra equity account.
B)contra asset account.
C)liability account.
D)contra liability account.
Q4) Rick Co. purchases 8,500 shares of the company's $6 par common stock for $8 per share. Journalize the transaction.
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Chapter 14: Long-Term Liabilities
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Sample Questions
Q1) The balance in the Bonds Payable is a credit of $16,500. The balance in the Premium on Bonds Payable is a credit of $800. The balance sheet will report the bond balance as $15,700.
A)True
B)False
Q2) In order to expand business, the management of Vereos Inc. decided to issue Long-term notes payable for $50,000. The note will be paid over ten years with payments of $5,000 plus 12% interest. Provide the journal entry needed after 1 year for the first installment payment.
Q3) An amortization schedule details each loan payment's allocation between principal and interest and also the beginning and ending balances of the loan.
A)True
B)False
Q4) On May 1, 2015, Vinnie Services issued a long-term notes payable for $35,000. It is payable over a 5-year term in $7,000 annual principal payments plus interest, on May 1 of each year beginning on May 1, 2016. Provide the initial journal entry for the issuance of the note.
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Page 16
Chapter 15: Investments
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Sample Questions
Q1) Debra Technologies invested $50,000 to buy $50,000 face value, 8%, five-year in municipal bonds on January 2, 2010. The bonds will mature on January 2, 2015. The bonds pay interest semiannually on January 2 and July 2 every year till maturity. Based on the information provided, which of the following will be included in the journal entry for the transaction on January 2, 2014?
A)a credit to Interest Revenue for $4,000
B)a debit to Interest Revenue for $4,000
C)a credit to Interest Revenue for $2,000
D)a debit to Interest Revenue for $2,000
Q2) Debra Technologies invested $50,000 to buy $50,000 face value, 8%, five-year in municipal bonds on January 2, 2010. The bonds will mature on January 2, 2015. The bonds pay interest semiannually on January 2 and July 2 every year till maturity. When the company receives interest payments, how will the balance sheet line items be affected?
A)Assets will decrease.
B)Total asset will remain unchanged.
C)Liabilities will decrease.
D)Equity will increase.
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Chapter 16: The Statement of Cash Flows
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Sample Questions
Q1) The amount of net cash flow from operating activities will be different in the direct and indirect methods when preparing the statement of cash flows.
A)True
B)False
Q2) A company's Inventory account increased $27,900 and its Accounts Payable account decreased $19,500 during the year. The Accounts Payable relates only to the acquisition of inventory. Sales were $795,300 and Cost of Goods Sold was $549,400. What was the payment made to the suppliers of inventory?
A)$577,300
B)$568,900
C)$596,800
D)$47,400
Q3) Which of the following sections of the statement of cash flows include activities that affect Net Income on the income statement? (Assume the indirect method is used.)
A)the financing section
B)the operating section
C)the investing section
D)the non-cash investing and financing section
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Chapter 17: Financial Statement Analysis
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Sample Questions
Q1) Zebra Inc. cost of goods sold for the year is $1,900,000 and average merchandise inventory for the year is $129,000. Calculate the inventory turnover ratio of the company.
A)16.78 times
B)14.73 times
C)33.8 times
D)65.5 times
Q2) Days' sales in inventory is a ratio measure that shows how quickly a company can collect its receivables.
A)True
B)False
Q3) An adverse opinion is issued if the auditor finds that the financial statements are not presented fairly.
A)True
B)False
Q4) To calculate the acid-test ratio, merchandise inventory and prepaid expenses are ignored.
A)True
B)False
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Chapter 18: Introduction to Managerial Accounting
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Sample Questions
Q1) Which of the following will be classified as a conversion cost?
A)Cost of raw materials
B)Depreciation on factory equipment
C)Salary of sales personnel
D)Depreciation on office furniture
Q2) Manufacturing businesses have inventory accounts, but merchandising businesses do not.
A)True
B)False
Q3) Which of the following is both a prime cost and a conversion cost?
A)Manufacturing overhead
B)Direct materials
C)Direct labor
D)Selling expenses
Q4) In a manufacturing firm, advertising and marketing costs are included in manufacturing overhead.
A)True
B)False
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Chapter 19: Job Order Costing
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Sample Questions
Q1) The journal entry to record $1,500 of direct labor and $200 of indirect labor incurred will include debit(s)to the:
A)Manufacturing Overhead account for $1,700.
B)Work-in-Process Inventory account for $1,500 and Finished Goods Inventory account for $200.
C)Finished Goods Inventory account for $1,700.
D)Work-in-Process Inventory account for $1,500 and Manufacturing Overhead account for $200.
Q2) The cost of goods manufactured is recorded with a debit to the Finished Goods Inventory account and a credit to the Work-in-Process Inventory account.
A)True
B)False
Q3) Manufacturing overhead is allocated by debiting the Work-in-Process Inventory account and crediting the Manufacturing Overhead account. A)True
B)False
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Chapter 20: Process Costing
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Sample Questions
Q1) Which of the following formulae is used to calculate the cost per equivalent unit of production (EUP)for direct materials?
A)Cost per EUP for direct materials = Total conversion costs ÷ Equivalent units of production for direct materials
B)Cost per EUP for direct materials = Total direct materials costs ÷ Equivalent units of production for direct materials
C)Cost per EUP for direct materials = Total transferred in costs ÷ Equivalent units for transferred in
D)Cost per EUP for direct materials = Total direct materials costs ÷ Equivalent units of production for conversion costs
Q2) The cost amounts that are transferred out from one process to another process become transferred in costs for the receiving process.
A)True B)False
Q3) Direct labor costs are accumulated in the Manufacturing Overhead account. A)True B)False
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Chapter 21: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Sensitivity analysis empowers managers with better information for decision making by analyzing how various business strategies will affect profits earned by the company.
A)True
B)False
Q2) The amount by which sales can decrease before the company incurs an operating loss is called breakeven point.
A)True
B)False
Q3) Contribution margin ratio is the ratio of contribution margin to:
A)net sales revenue.
B)cost of goods sold.
C)total variable costs.
D)total fixed costs.
Q4) When a company produces more units than it sells, income under absorption costing will exceed income under variable costing.
A)True
B)False
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23
Chapter 22: Master Budgets
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Sample Questions
Q1) Preparation of the production budget is the first step in the preparation of operating budget.
A)True
B)False
Q2) Which of the following is true of the sales budget?
A)It provides sales values that are used to prepare financial statements for external reporting purposes.
B)It captures the variable and fixed expenses of the business.
C)It is used in the production budget.
D)It shows the value of expected production in a period.
Q3) The production budget determines the number of units to be produced during the period.
A)True
B)False
Q4) Unlike a manufacturing company, the cash budget is the cornerstone for the master budget of a merchandiser.
A)True
B)False
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Chapter 23: Flexible Budgets and Standard Cost Systems
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Sample Questions
Q1) Standard costs are developed by the cooperative effort of procurement, production, human resources, and accounting personnel.
A)True
B)False
Q2) Setting standard costs is a function done within a company's production department and does not require any input from other departments.
A)True
B)False
Q3) A standard cost system is an accounting system that uses standards for product costs.
A)True
B)False
Q4) The favorable variances have credit balances. They are contra-expenses and therefore decrease the expense Cost of Goods Sold.
A)True B)False
Q5) A favorable variance reflects a decrease in operating income.
A)True B)False
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Chapter 24: Cost Allocation and Responsibility Accounting
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Q1) The first step in developing an activity-based costing system is to identify the activities that will be used to assign the manufacturing overhead and estimate their total costs.
A)True
B)False
Q2) Performance report of a profit center includes both revenues and expenses.
A)True
B)False
Q3) One part of the balanced scorecard helps management answer the question "How do we look to shareholders?" Which of the four perspectives is being described here?
A)financial perspective
B)customer perspective
C)internal business perspective
D)learning and growth perspective
Q4) The payroll department of a manufacturing company is most likely to be a(n): A)cost center.
B)revenue center.
C)investment center.
D)profit center.
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Chapter 25: Short-Term Business Decisions
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Sample Questions
Q1) A company produces 100 microwave ovens per month, each of which includes one electrical circuit. The company currently manufactures the circuit in-house but is considering outsourcing the circuits at a contract price of $28 each. Currently, the cost of producing circuits in-house includes variable costs of $26 per circuit and fixed costs of $5,000 per month.
The controller says that they could outsource production of the circuit, if it reduces fixed cost greater than $200 per month. Is this statement true or false?
A)True
B)False
Q2) Which of the following statements is true?
A)Companies are price-takers when their products are unique.
B)Companies are price-setters for a product when there is intense competition.
C)Companies are price-takers for a product when pricing approach emphasizes cost-plus pricing.
D)Companies are price-takers when they have little or no control over the prices of their products or services.
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Chapter 26: Capital Investment Decisions
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Sample Questions
Q1) Capital budgeting is:
A)the process of planning the investment in long-term assets.
B)preparing the budget for operating expenses.
C)the process of evaluating the profitability of a business.
D)the process of making pricing decisions for products.
Q2) At the internal rate of return (IRR), the present value of cash inflows will be equal to:
A)initial investment.
B)residual value.
C)average operating income.
D)profit from the project.
Q3) Which of the following is a capital budgeting method that is used to screen potential investments?
A)return on assets
B)acid test ratio
C)accounting rate of return
D)debt-to-equity ratio
Q4) All else being equal, investments with longer payback periods are preferable.
A)True
B)False
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