Managerial Accounting Question Bank
Course Introduction
Managerial Accounting focuses on the use of accounting information by managers within organizations for planning, controlling, and decision-making purposes. The course covers topics such as cost behavior, budgeting, break-even analysis, variance analysis, and performance evaluation. It emphasizes the interpretation and application of financial data to help managers allocate resources efficiently, make strategic decisions, and achieve organizational objectives. Students will learn how management accounting techniques support business operations and strategies, enabling them to contribute effectively to organizational success.
Recommended Textbook
Financial and Managerial Accounting Information for Decisions 5th Edition by John J Wild
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Page 2
Chapter 1: Introducing Accounting in Business
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Sample Questions
Q1) Ending liabilities are 67,000,beginning equity was $87,000,common stock issued during year totaled $31,000,expenses for the year were $22,000,dividends declared totaled $13,000,ending equity for the year is $181,000,and beginning assets for the year were $222,000.
What are the ending assets for the year?
A) $154,000
B) $134,000
C) $212,000
D) $248,000
E) $155,000
Answer: D
Q2) The primary objective of financial accounting is to provide general-purpose financial statements to help external users analyze and interpret an organization's activities.
A)True
B)False
Answer: True
Q3) Cool Tours had beginning equity of $72,000,net income of $25,000,and dividends of $9,000.Calculate the ending equity.
Answer: Ending equity = $72,000 + $25,000 - $9,000 = $88,000.
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Chapter 2: Analyzing and Recording Transactions
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Sample Questions
Q1) A debit is:
A) An increase in an account.
B) The right-hand side of a T-account.
C) A decrease in an account.
D) The left-hand side of a T-account.
E) An increase to a liability account.
Answer: D
Q2) A list of all accounts used by a company and the identification number assigned to each account is called a:
A) Ledger
B) Journal
C) Trial balance
D) Chart of accounts
E) General Journal
Answer: D
Q3) The journal is known as the book of final entry because financial statements are prepared from it.
A)True
B)False
Answer: False
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Chapter 3: Adjusting Accounts and Preparing Financial Statements
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Sample Questions
Q1) __________________________ is the process of allocating the cost of plant assets to their expected useful lives.
Answer: Depreciation
Q2) Earned but uncollected revenues that are recorded during the adjusting process with a credit to a revenue account and a debit to an expense account are referred to as accrued expenses.
A)True
B)False
Answer: False
Q3) Adjusting entries are made after the preparation of financial statements.
A)True
B)False
Answer: False
Q4) July 31,2013,the end of the quarter is on a Wednesday.Employees get paid each Friday for the week worked.Abel Co.has five employees who earn $100 per day each.Assuming the proper adjusting journal entry was made on June 30,prepare the journal entry to record the payment of wages on August 2.
Answer: Wages Expense .$1,000
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Chapter 4: Accounting for Merchandising Operations
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Sample Questions
Q1) A perpetual inventory system is able to directly measure and monitor inventory shrinkage.
A)True
B)False
Q2) Why does Chelsea Eubank's company,Faithful Fish,use a perpetual inventory system?
Q3) The gross margin ratio equals net sales less ___________ divided by net sales.
Q4) Inventory shrinkage can be computed by comparing the ___________ of inventory with recorded quantities and amounts.
Q5) List the steps of the operating cycle for a merchandiser with credit sales.
Q6) A merchandising company's ___________ begins with the purchase of merchandise and ends with the collection of cash from merchandise sales.
Q7) A debit to Sales Returns and Allowances and a credit to Accounts Receivable:
A) Reflects an increase in amount due from a customer.
B) Recognizes that a customer returned merchandise and/or received an allowance.
C) Requires a debit memorandum to recognize the customer's return.
D) Is recorded when a customer takes a discount.
E) Reflects an increase in net sales.
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Q8) What is the difference between the periodic and perpetual inventory systems?
Chapter 5: Inventories and Cost of Sales
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Sample Questions
Q1) The full disclosure principle:
A) Requires that when a change in inventory valuation method is made, the notes to the financial statements report the type of change, why it was made, and its effect on net income.
B) Requires that companies use the same accounting method for inventory valuation period after period.
C) Is not subject to the materiality principle.
D) Is only applied to retailers.
E) Is also called the consistency principle.
Q2) Regardless of what inventory method or system is used,cost of goods available for sale must be allocated between ___________________ and ___________________.
Q3) The ____________________ ratio reflects how much inventory is available in terms of days' sales.
Q4) Monthly or quarterly statements are called interim statements because they are prepared between the traditional annual statement dates.
A)True
B)False
Q5) Identify and describe the four inventory valuation methods.
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Chapter 6: Cash and Internal Controls
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Sample Questions
Q1) Discuss how the principles of internal control apply to cash receipts.
Q2) The document the purchasing department sends to the vendor that is used to place an order is the __________________________.
Q3) The Petty Cash account is a separate checking account used for small amounts.
A)True
B)False
Q4) Bonding does not discourage employees from stealing from the company as employees know that bonding is an insurance policy against loss from theft.
A)True
B)False
Q5) Michael Inwald of CHEESEBOY maintains a system of internal controls and managing cash.Identify some of these internal controls and explain how they contribute to the success of the company.
Q6) Controls of cash disbursements are important for companies as most large thefts occur from payment of fictitious invoices.
A)True
B)False
Q7) Explain the differences between cash and cash equivalents.
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Chapter 7: Accounts and Notes Receivable
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Sample Questions
Q1) The percent of sales method for estimating bad debts assumes that a given percentage of a company's credit sales for the period are uncollectible.
A)True
B)False
Q2) Explain the options a company has when converting its receivables to cash.
Q3) Myrex Corporation purchased $4,000 in merchandise from TechCom.Myrex signed a 60-day,10%,$4,000 promissory note.TechCom should record the sale with a journal entry debiting ____________________ for $________ and crediting __________________ for $________.
Q4) A company had an accounts receivable turnover ratio of 8 and net sales of $600,000 for a given period.What was the average accounts receivable amount for this period?
A) $4,800,000.
B) $2,919.99.
C) $205.48.
D) $75,000.
E) Average accounts receivable cannot be determined from this information.
Q5) How does Jarrett Pumphrey of ClearCorrect,view decisions involving sales on credit?
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Chapter 8: Long-Term Assets
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Sample Questions
Q1) On December 31,2013,Stable Company sold a piece of equipment that was purchased on January 1,2009.The equipment originally cost $820,000 and has an estimated useful life of eight years.Stable uses the double-declining-balance method of depreciation.What is the gain/loss on the sale of equipment that Stable will recognize if the equipment was sold for $230,000?
A)$35,409.50 gain
B) $25,000.00 loss
C) $25,000.00 gain
D) $35,408.00 loss
E) $0; no gain or loss
Q2) A company's annual accounting period ends on September 30.During the current year,a depreciable asset that cost $16,000 was purchased on January 1.The asset has a $2,000 estimated salvage value.The company uses straight-line depreciation and expects the asset to have a four-year life.What is the total depreciation expense for the current year?
A) $4,000
B) $3,000
C) $3,500
D) $2,625
E) $875
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Chapter 9: Current Liabilities
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Sample Questions
Q1) The times interest earned computation is:
A) (Net income + Interest expense + Income taxes)/Interest expense.
B) (Net income + Interest expense - Income taxes)/Interest expense.
C) (Net income - Interest expense - Income taxes)/Interest expense.
D) (Net income - Interest expense + Income taxes)/Interest expense.
E) Interest expense/(Net income + Interest expense + Income taxes expense).
Q2) Identify the types of payroll records prepared for each pay period and each employee.
Q3) A contingent liability:
A) Is always of a specific amount.
B) Is a potential obligation that depends on a future event arising out of a past transaction or event.
C) Is an obligation not requiring future payment.
D) Is an obligation arising from the purchase of goods or services on credit.
E) Is an obligation arising from a future event.
Q4) Vacation benefits are a form of estimated liabilities for an employer.
A)True
B)False
Q5) A company borrowed $60,000 on a 60-day,10% note payable from its bank.Compute the total cash payment at the note's maturity.
Page 11
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Chapter 10: Long-Term Liabilities
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Sample Questions
Q1) A company issues bonds at par on June 1.These 7% bonds have a par value of $500,000 and pay interest annually.June 1 is five months after the most recent interest payment date.How much total cash interest is received on June 1 by the bond issuer?
A) $0
B) $2,916.66
C) $100,000.00
D) $14,583.33
E) $35,000.00
Q2) A bondholder that owns a $1,000,10%,10-year bond has:
A) Ownership rights in the company who issued the bond.
B) The right to receive $10 per year until maturity.
C) The right to receive $1,000 at maturity.
D) The right to receive $10,000 at maturity.
E) The right to receive dividends of $1,000 per year.
Q3) Interest payments on bonds are determined by multiplying the par value of the bond by the stated contract rate.
A)True
B)False
Q4) Identify and explain the different types and payment patterns of notes payable.
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Chapter 11: Corporate Reporting and Analysis
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Sample Questions
Q1) A proxy is:
A) A legal document that gives a designated agent of a stockholder the power to vote the stock.
B) A contractual commitment by an investor to purchase unissued shares of stock.
C) An amount of assets defined by state law that stockholders must invest and leave invested in a corporation.
D) The right of common stockholders to protect their proportionate interests in a corporation by having the first opportunity to purchase additional shares of common stock issued by the corporation.
E) An arbitrary amount assigned to no-par stock by the corporation's board of directors.
Q2) A company issued 60 shares of $100 par value stock for $7,000 cash.The total amount of contributed capital is:
A) $100
B) $600
C) $1,000
D) $6,000
E) $7,000
Q3) To what does Andrew Mason,the founder of Groupon,attribute his success?
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Chapter 12: Reporting Cash Flows
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Sample Questions
Q1) What are the five usual steps involved in the preparation of the statement of cash flows?
Q2) The direct method of reporting operating cash flows:
A) Is recommended but not required by the FASB.
B) Must be used by all companies.
C) Is used by most companies.
D) Is considered supplementary disclosure.
E) Is not recommended by the FASB, but is commonly used.
Q3) Which of the following items is reported on the statement of cash flows under financing activities?
A) Declaration of a cash dividend.
B) Payment of a cash dividend.
C) Declaration of a stock dividend.
D) Payment of a stock dividend.
E) Stock split.
Q4) The statement of cash flows is divided into three sections called the _____________,_____________ and _______________ sections.
Q5) A main purpose of the statement of cash flows is to report all the major cash ________ and cash _______________.
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Chapter 13: Analysis of Financial Statements
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Sample Questions
Q1) A company has an inventory turnover ratio of 2.90,merchandise inventory for 2014 of $46,095,and cost of goods sold of $173,420.What is the average inventory?
Q2) Net sales divided by average total assets is equal to the:
A) Profit margin
B) Total asset turnover
C) Current ratio
D) Sales return ratio
E) Return on total assets
Q3) General standards or guidelines of comparisons include the 2 to 1 level for the current ratio and 1 to 1 level for the acid-test ratio.
A)True
B)False
Q4) Trend percentage is calculated by dividing _________________________ by ___________________________ and multiplying the result by 100.
Q5) Financial statement analysis can be used for personal investment decisions. A)True
B)False
Q6) Identify and describe three common tools of financial statement analysis.
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Chapter 14: Managerial Accounting Concepts and Principles
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Q1) The Ticky Company manufactures tacks.Costs for September were direct labor,$84,000; indirect labor,$36,700; direct materials,$55,900; factory maintenance,$4,800; factory utilities,$3,200; and insurance on plant and equipment,$700.What is Ticky Company's factory overhead for September?
Q2) A management concept that applies quality improvement to all aspects of business activities is called:
A) Continuous operations.
B) Customer orientation.
C) Just-in-time.
D) Managerial accounting.
E) Total quality management.
Q3) ____________________ inventory consists of completed products ready for sale by a manufacturer.
Q4) _____________________ rejects the notions of "good enough" or "acceptable" and challenges employees and managers to continuously experiment with new and improved business practices.
Q5) The concept of total quality management focuses on continuous improvement. A)True B)False
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Chapter 15: Job Order Costing and Analysis
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Sample Questions
Q1) Job order manufacturing systems would be appropriate for companies that produce custom homes,specialized equipment,and special computer systems.
A)True
B)False
Q2) The production activities for a customized product represent a(n):
A) Operation.
B) Job.
C) Unit.
D) Pool.
E) Process.
Q3) The rate established prior to the beginning of a period that relates estimated overhead to an allocation factor such as estimated direct labor and that is used to assign overhead cost to jobs is the:
A) Predetermined overhead allocation rate.
B) Overhead variance rate.
C) Estimated labor cost rate.
D) Chargeable overhead rate.
E) Miscellaneous overhead rate.
Q4) A ______________________ is a separate record maintained for each job.
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Chapter 16: Process Costing
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Q1) Hybrid systems contain aspects of both process and job order operations.
A)True
B)False
Q2) If a department that applies process costing starts the reporting period with 100,000 physical units that were 20% complete with respect to direct labor,it must add 80,000 equivalent units of labor to complete them.
A)True
B)False
Q3) If Department J uses $40,000 of direct materials and Department K uses $70,000 of direct materials,the following journal entry would be recorded by the process cost accounting system:
\(\begin{array}{llr}
\text { Raw Materials Inventory } &70,000\\
\text { Goods in Process Inventory, Department J } &40,000\\
\text { Goods in Process Inventory, Department K } &30,000 \end{array}\)
A)True
B)False
Q4) What was the cost of the direct labor used in the Bagging Department?
Page 18
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Chapter 17: Activity-Based Costing and Analysis
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Q1) Multiple cost pools are used when allocating overhead using the plantwide overhead rate method.
A)True
B)False
Q2) Compute Aztec's departmental overhead rate for the baking department based on direct labor hours.
A) $1.50 per DLH
B) $5.00 per DLH
C) $0.75 per DLH
D) $0.50 per DLH
E) $2.08 per DLH
Q3) The plantwide overhead rate is determined by using volume-related measures.
A)True B)False
Q4) Kudzu's plantwide overhead rate will be $21 per direct labor hour next year. A)True B)False
Q5) The departmental overhead rate method allows each department to have its own overhead rate and its own ____________________.
Q6) The ________________________ is the target of the cost assignment.
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Chapter 18: Cost-Volume-Profit Analysis
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Q1) A product sells for $200 per unit,and its variable costs per unit are $130.The fixed costs are $420,000.What is the break-even point in dollar sales?
A) $2,100
B) $6,000
C) $420,000
D) $646,154
E) $1,200,000
Q2) A company is looking into two alternative methods of producing its product.The following information about the two alternatives is available: \(\begin{array}{lcc}
&\text { Alternative \#1 }&\text { Alternative \#2 }\\
\text { Variable costs per unit } & \$ 8 & \$ 12 \\
\text { Fixed costs } & \$ 240,000 & \$ 140,000 \\
\text { Selling price per unit } & \$ 20 & \$ 20 \end{array}\)
If the company's expected sales volume is 35,000 units,which alternative should be selected?
Q3) Define variable cost,fixed cost,and mixed cost.
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Chapter 19: Variable Costing and Performance Reporting
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Q1) _______________ and _______________ are product costs that can be directly traced to the product.
Q2) Cost information from both absorption costing and variable costing can aid managers in pricing.
A)True
B)False
Q3) When units produced equal units sold,reported income is identical under absorption costing and variable costing.
A)True
B)False
Q4) What are the benefits of using variable costing when striving to control costs? Are these benefits available under absorption costing?
Q5) Contribution margin is another way to refer to gross margin.
A)True
B)False
Q6) What are the limitations of using variable costing?
Q7) Variable costing treats fixed overhead cost as a period cost.
A)True
B)False
21
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Chapter 20: Master Budgets and Performance Planning
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Q1) Total budgeted sales of both products for the year would be:
A) $42,000
B) $200,000
C) $264,000
D) $464,000
E) $500,000
Q2) A budget can be an effective means of communicating management's plans to the employees of a business.
A)True
B)False
Q3) Bentels Co.desires a December 31 ending inventory of 2,840 units.Budgeted sales for December are 4,000 units.The November 30 inventory was 1,800 units.Budgeted purchases are:
A) 5,040 units
B) 1,240 units
C) 6,840 units
D) 4,000 units
E) 5,800 units
Q4) Briefly describe the process by which budgets are developed and administered.
Q5) What is activity-based budgeting?
22
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Chapter 21: Flexible Budgets and Standard Costs
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Q1) Chips Co.assigned direct labor cost to its products in May for 1,300 standard hours of direct labor at the standard $8 per hour rate.The direct labor rate variance for the month was $200 favorable and the direct labor efficiency variance was $150 favorable.Prepare the journal entry to charge Goods in Process Inventory for the standard labor cost of the goods manufactured in May and to record the direct labor variances.Assuming that the direct labor variances are immaterial,prepare the journal entry that Chips would make to close the variance accounts.
Q2) The difference between the total budgeted overhead cost and the overhead applied to production using the predetermined overhead rate is the:
A) Production variance
B) Volume variance
C) Overhead cost variance
D) Quantity variance
E) Controllable variance
Q3) Flexible budgets may be prepared before or after an actual period of activity.Why would management prepare such budgets at differing time frames?
Q4) At the end of the accounting period,immaterial variances are closed to
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Chapter 22: Decentralization and Performance Measurement
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Q1) A sawmill bought a shipment of logs for $40,000.When cut,the logs produced 1 million board feet of lumber in the following grades:
Type 1 - 400,000 bd.ft.priced to sell at $0.12 per bd.ft.
Type 2 - 400,000 bd.ft.priced to sell at $0.06 per bd.ft.
Type 3 - 200,000 bd.ft.priced to sell at $0.04 per bd.ft.
How much cost should be allocated to Type 1 and Type 2,respectively?
\(\begin{array} { l l l }
& \text { Type1 } & \text { Type 2 } \\\end{array}\)
A.\(\begin{array} { l l l } & \$ 16,000 & \$ 16,000 \\\end{array}\)
B.\(\begin{array} { l l l } & \$ 13,333 & \$ 4,444 \\\end{array}\)
C. \(\begin{array} { l l l } & \$ 40,000 & \$ 24,000 \\\end{array}\)
D. \(\begin{array} { l l l } &\$ 24,000 & \$ 12,000 \\\end{array}\)
E. \(\begin{array} { l l l } &\$24,000&\$ 8,000 \end{array}\)
Q2) The ________________________________ is a system of performance measures,including nonfinancial measures,used to assess company and division manager performance.
Q3) Expense allocations cannot always avoid some arbitrariness. A)True B)False
Page 24
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Chapter 23: Relevant Costing for Managerial Decisions
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Q1) A company expects to produce and sell 9,000 units of a single product.Management desires an 18% return on assets of $1,750,000.The following additional company information is available: \(\begin{array}{lr}
\text { Variable costs (per unit) } & \\
\text { Production costs } & \$ 79 \\
\text { Nonproduction costs } & \$ 5 \\
\text { Fixed costs (in total) } &\\
\text { Overhead } & \$ 279,000 \\
\text { Nonproduction } & \$ 90,000
\end{array}\)
Compute markup per unit.Assume that markup percentage equals desired profit divided by total costs.
A) $35
B) $84
C) $110
D) $125
E) $160
Q2) What is the difference between an opportunity cost and a sunk cost?
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Chapter 24: Capital Budgeting and Investment Analysis
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Q1) The break-even time (BET)method is a variation of the:
A) Payback method.
B) Internal rate of return method.
C) Accounting rate of return method.
D) Net present value method.
E) Present value method.
Q2) Which methods of evaluating a capital investment project ignore the time value of money?
A) Net present value and accounting rate of return.
B) Accounting rate of return and internal rate of return.
C) Internal rate of return and payback period.
D) Payback period and accounting rate of return.
E) Net present value and payback period.
Q3) A company purchases a machine for $84,000.The machine has an expected life of 12 years and no salvage value.The company anticipates a yearly net income of $41,000 after taxes of 32% to be received uniformly throughout each year.What is the accounting rate of return?
Q4) The _______________________________ is computed by discounting the future net cash flows from the investment at the project's required rate of return and then subtracting the initial amount invested.
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Chapter 25: Accounting With Special Journals
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Q1) Input devices include journal entries,keyboards,scanners,and modems.
A)True
B)False
Q2) Each transaction recorded in the sales journal yields a debit to Accounts Receivable and a credit to Sales.
A)True
B)False
Q3) The difference in the sales journal between the perpetual and periodic inventory systems is that a column is used to record cost of goods sold and inventory amounts for each sale under the perpetual system but not the periodic system.
A)True
B)False
Q4) The __________________ principle requires that an accounting information system conform to a company's activities,personnel,and structure and must adapt to a company's unique characteristics.
Q5) Under the perpetual inventory system,special journals are not required.
A)True
B)False
Q6) What are the five basic components of accounting information systems?
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Chapter 26: Time Value of Money
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Q1) The future value of an ________________ annuity is the accumulated value of each annuity payment with interest as of the date of the final payment.
Q2) What amount can you borrow if you make six quarterly payments of $4,000 at a 12 % annual rate of interest?
A) $24,838.00
B) $21,668.80
C) $31,049.00
D) $40,000.00
E) $44,800,00
Q3) You hope to retire in 10 years.Regrettably you are only just now beginning to save money for this purpose.You expect to save $6,000 a year at an annual rate of 8%.How much will you have accumulated when you retire?
Q4) A company borrows money from the bank by promising to make six annual year-end payments of $25,000 each.How much is the company able to borrow if the interest rate is 9%?
Q5) Thompson Company has acquired a machine from a dealer which requires a payment of $45,000 at the end of five years.This transaction includes interest at 8%,compounded semiannually.What is the value of the machine today?
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Chapter 27: Investments and International Operations
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176 Verified Questions
176 Flashcards
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Sample Questions
Q1) Doherty Corporation had net income of $30,000,net sales of $1,000,000,and average total assets of $500,000.Its return on total assets is equal to:
A) 3%
B) 200%
C) 6%
D) 17%
E) 1.5%
Q2) Long-term investments can include funds set aside for special purposes such as bond sinking funds.
A)True
B)False
Q3) Chrono Co.held bonds of Ayrford Co.with a cost of $125,000 and a year-end market value of $123,700.Chrono also held 1,500 shares of Avian common stock with a cost of $25,000 and a year-end market value of $26,100.These are classified as long-term available-for-sale securities.Prepare the journal entry to record the market value of the investments as of its December 31 year-end.
Q4) Explain how investors report investments in equity securities when the investor has a controlling influence over an investee.
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Chapter 28: Accounting for Partnerships
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126 Verified Questions
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Sample Questions
Q1) Force and Zabala are partners.Force's capital balance in the partnership is $98,000 and Zabala 's capital balance is $53,000.Force and Zabala have agreed to share equally in income or loss.Force and Zabala agree to accept Burns with a 25% interest.Burns will invest $56,000 in the partnership.The total bonus that is granted to the existing partners equals:
A) $6,500.
B) $9,125.
C) $2,125.
D) $4,250.
E) $0, because Force and Zabala actually grant a bonus to Burns.
Q2) When partners invest in a partnership,their capital accounts are credited for the amount invested.
A)True
B)False
Q3) Assume that the S & B partnership agreement gave Steely 60% and Breck 40% of partnership income and losses.The partnership recorded a loss of $27,000 in the current period.Steely's share of the loss equals $16,200 and Breck's share equals $10,800.
A)True
B)False
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