Managerial Accounting Pre-Test Questions
Course Introduction
Managerial Accounting focuses on the principles and techniques used by managers to make informed business decisions. The course covers topics such as cost behavior, budgeting, performance evaluation, variance analysis, and decision-making processes for planning and controlling organizational activities. Emphasis is placed on interpreting accounting information for internal use, analyzing costs for product and process improvements, and utilizing financial data to support strategic management initiatives. Students learn how managerial accounting supports organizational objectives, enhances operational efficiency, and contributes to effective leadership within various types of businesses.
Recommended Textbook
Corporate Financial Accounting 13th Edition by Carl Warren
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Page 2
Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) How does the purchase of equipment by signing a note affect the accounting equation?
A)assets increase; assets decrease
B)assets increase; liabilities decrease
C)assets increase; liabilities increase
D)assets increase; stockholders' equity increases
Answer: C
Q2) If total assets increased by $190,000 during a specific period and liabilities decreased by $10,000 during the same period,the period's change in total stockholders' equity was a $200,000 increase.
A)True
B)False
Answer: True
Q3) Liabilities are reported on the A)income statement
B)retained earnings statement
C)statement of cash flows
D)balance sheet
Answer: D
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Page 3
Chapter 2: Analyzing Transactions
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Sample Questions
Q1) Revenues are equal to the difference between cash receipts and cash payments.
A)True
B)False
Answer: False
Q2) The gross increases in stockholders' equity attributable to business activities are called
A)assets
B)liabilities
C)revenues
D)expenses
Answer: C
Q3) What is the posting reference that will be found in the prepaid insurance account?
A)11
B)15
C)3
D)13
Answer: C
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Page 4
Chapter 3: The Adjusting Process
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Sample Questions
Q1) Adjusting entries always include
A)only income statement accounts
B)only balance sheet accounts
C)the cash account
D)at least one income statement account and one balance sheet account
Answer: D
Q2) Which of the following is an example of accrued revenue?
A)snow removal services that have been paid for three months in advance
B)snow removal services that have been provided but have not been billed or paid
C)an agreement that has been signed for snow removal services for the next three months
D)snow removal services that has been provided and paid on the same day
Answer: B
Q3) Salaries of $6,400 are paid for a five-day week on Friday.Prepare the adjusting journal entry that is required if the month ends on Thursday.
Answer: \(\begin{array}{llcc}
\text { Salar1es Expense } [\$ 6,400 / 5 \times 4] &5,120 \\
\text { Salaries Payable } &&5,120 \end{array}\)
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Page 5
Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Which of the following accounts ordinarily appears in the post-closing trial balance?
A)Fees Earned
B)Supplies Expense
C)Dividends
D)Unearned Rent
Q2) The work sheet is not considered a part of the formal accounting records.
A)True
B)False
Q3) It is not necessary to post the closing entries to the general ledger.
A)True
B)False
Q4) Land is an example of a plant asset.
A)True
B)False
Q5) Debts listed as current liabilities are those that
A)will be paid in less than one year
B)are due to be paid in 5 to 10 years
C)are due to be paid in more than one year
D)are owed to the stockholders and will never be paid
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Chapter 5: Accounting for Merchandising Businesses
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Sample Questions
Q1) A retailer purchases merchandise with a catalog list price of $30,000.The retailer receives a 15% trade discount and credit terms of 2/10,n/30.How much cash will be needed to pay this invoice within the discount period?
A)$30,000
B)$24,900
C)$29,400
D)$24,990
Q2) Complete the following data taken from the condensed income statements for merchandising Companies X,Y,and Z.
\(\begin{array}{|l|r|r|r|}
\hline & \text { Company } \mathrm{X} & \text { Company } \mathrm{Y} & \text { Company Z } \\
\hline \text { Net income or net loss } & \$ 220 & \$ & ? 70 \\
\hline \text { Sales } & ? & 1,315 & 890 \\
\hline \text { Gross profit } & 435 & ? & 465 \\
\hline \text { Operating expenses } & ? & 565 & ? \\
\hline \text { Cost of merchandise sold } & 330 & 775 & ? \\
\hline
\end{array}\)
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Page 7
Chapter 6: Inventories
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Sample Questions
Q1) Cost flow is in the reverse order in which costs were incurred when using A)weighted average
B)last-in,first-out
C)first-in,first-out
D)average cost
Q2) In valuing merchandise for inventory purposes,net realizable value is the estimated selling price less any direct costs of disposal.
A)True
B)False
Q3) Garrison Company uses the retail method of inventory costing.It started the year with an inventory that had a retail cost of $45,000.During the year,Garrison purchased an inventory with a retail sales value of $300,000.After performing a physical inventory,Garrison calculated the inventory at retail to be $80,000.The mark up is 100% of cost.Determine the ending inventory at its estimated cost.
A)$160,000
B)$80,000
C)$40,000
D)$45,000
Q4) List three different security measures taken to safeguard inventory.
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Chapter 7: Sarbanes-Oxley,internal Control,and Cash
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Sample Questions
Q1) The amount of the "adjusted balance" appearing on the bank reconciliation as of a given date is the amount that is shown on the balance sheet for that date.
A)True
B)False
Q2) An example of good internal controls over cash payments is the taking of all cash discounts offered.
A)True
B)False
Q3) A check outstanding for two consecutive months will appear only on the first month's bank reconciliation.
A)True
B)False
Q4) Which of the following would be subtracted from the balance per books on a bank reconciliation?
A)outstanding checks
B)deposits in transit
C)notes collected by the bank
D)error in recording a check for $732 as $723
Q5) List the principal advantages of electronic funds transfers.
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Chapter 8: Receivables
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Sample Questions
Q1) List at least three indicators that a receivable may be uncollectible.
Q2) In accounting for uncollectible receivables,the balance in Allowance for Doubtful Accounts will directly impact the amount of the adjustment when applying which method?
A)direct write-off method
B)percentage of sales method
C)analysis of receivables method
D)both percentage of sales and analysis of receivables methods
Q3) At the beginning of the year,the balance in Allowance for Doubtful Accounts is a credit of $760.During the year,$120 of previously written off accounts are reinstated and accounts totaling $740 are written-off as uncollectible.The end-of-year balance before adjustment in Allowance for Doubtful Accounts should be
A)$760
B)$120
C)$140
D)$740
Q4) The party promising to pay a note at maturity is the maker.
A)True
B)False
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Chapter 9: Fixed Assets and Intangible Assets
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Sample Questions
Q1) The cost of computer equipment does not include the consultant's fee to supervise installation of the equipment.
A)True
B)False
Q2) For income tax purposes,most companies use an accelerated deprecation method called double declining balance.
A)True
B)False
Q3) Equipment with a cost of $220,000 has an estimated residual value of $30,000 and an estimated life of 10 years or 19,000 hours.It is to be depreciated by the straight-line method.What is the amount of depreciation for the first full year,during which the equipment was used 2,100 hours?
A)$21,000
B)$30,000
C)$22,000
D)$19,000
Q4) A gain can be realized when a fixed asset is discarded.
A)True
B)False
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Chapter 10: Current Liabilities and Payroll
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Sample Questions
Q1) The employee's earnings record would contain which data that the payroll register would probably not contain?
A)deductions
B)payment
C)earnings
D)cumulative earnings
Q2) A borrower has two alternatives for a loan: a issue a $480,000,60-day,8% note or 2 issue a $480,000,60-day note that the creditor discounts at 8%.Assume a 360-day year is used for interest calculations.
a Calculate the amount of the interest expense for each option.
b Determine the proceeds received by the borrower in each situation.
Q3) Journalize the following entries on the books of Winston Co.for August 1,September 1,and November 30.Assume a 360-day year is used for interest calculations.
Aug.1 Winston Co.purchased merchandise for $75,000 on account from Bagley Co.,terms n/30.Sept.1 Winston Co.issued a 90-day,6% note for $75,000 on account.
Nov.30 Winston Co.paid the amount due.
Q4) List five internal controls that relate directly to payroll.
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Chapter 11: Corporations: Organization,stock
Transactions,and Dividends
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Sample Questions
Q1) A corporation has 50,000 shares of $28 par stock outstanding that has a current market value of $150 per share.If the corporation issues a 4-for-1 stock split,the market value of the stock will fall to approximately
A)$7.00
B)$112.00
C)$37.50
D)$600.00
Q2) The declaration of a stock dividend decreases a corporation's stockholders' equity and increases its liabilities.
A)True
B)False
Q3) On April 2 a corporation purchased for cash 5,000 shares of its own $10 par common stock at $16 a share.It sold 3,000 of the treasury shares at $19 a share on June 10.The remaining 2,000 shares were sold on November 10 for $12 a share.
a Journalize the entries to record the purchase treasury stock is recorded at cost.
b Journalize the entries to record the sale of the stock.
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Page 13
Chapter 12: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be
A)debit Bonds Payable,credit Cash
B)debit Cash and Discount on Bonds Payable,credit Bonds Payable
C)debit Cash,credit Premium on Bonds Payable and Bonds Payable
D)debit Cash,credit Bonds Payable
Q2) A legal document that indicates the name of the issuer,the face value of the bond and such other data is called
A)trading on the equity
B)convertible bond
C)a bond debenture
D)a bond indenture
Q3) A bond is simply a form of an interest-bearing note.
A)True
B)False
Q4) If the market rate of interest is 8% and a corporation's bonds bear interest at 7%,the bonds will sell at a premium.
A)True
B)False
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Chapter 13: Investments and Fair Value Accounting
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Sample Questions
Q1) Comprehensive income must be reported on the income statement.
A)True
B)False
Q2) Discuss the similarities and differences in reporting trading securities,available-for-sale securities and held-to-maturity securities.
Q3) If the bonds are purchased between interest dates,the purchase price includes accrued interest since the last interest payment.
A)True
B)False
Q4) On July 5,Winter Company had a market price of $58 per share of common stock.For the prior year,Winter Co.had paid an annual dividend of $3.48 per share.What is the dividend yield for Winter Company?
A)6.0%
B)0.6%
C)16.67%
D)1.67%
Q5) Compare and contrast why companies invest cash in short-term temporary investments vs.long-term investments.
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) Income tax was $175,000 for the year.Income tax payable was $30,000 and $40,000 at the beginning and end of the year,respectively.Cash payments for income tax reported on the statement of cash flows using the direct method is
A)$175,000
B)$165,000
C)$205,000
D)$215,000
Q2) If land costing $145,000 was sold for $205,000,the $60,000 gain on the sale would be added to net income in the operating activities section of the statement of cash flows prepared by the indirect method.
A)True
B)False
Q3) Which of the following would not be found in a schedule of noncash investing and financing activities,reported at the end of a statement of cash flows?
A)equipment acquired in exchange for a note payable
B)bonds payable exchanged for capital stock
C)purchase of treasury stock
D)capital stock issued to acquire fixed assets
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) A common measure of liquidity is
A)the ratio of sales to assets
B)dividends per share of common stock
C)the accounts receivable turnover
D)the profit margin
Q2) The ratio of the sum of cash,receivables,and marketable securities to current liabilities is referred to as the current ratio.
A)True
B)False
Q3) Corporate annual reports typically do not contain
A)management discussion and analysis
B)an SEC statement expressing an opinion
C)accompanying notes
D)an auditor's report
Q4) The report on internal control required by the Sarbanes-Oxley Act of 2002 may be prepared by either management or the company's auditors.
A)True
B)False
Q5) Define solvency and profitability.How are they alike?
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