Managerial Accounting Review Questions
Course Introduction
Managerial Accounting focuses on the concepts, techniques, and tools essential for internal decision-making within organizations. The course explores cost behaviors, budgeting processes, performance evaluation, and the use of accounting data to plan and control operations. Students learn how to analyze and interpret financial and nonfinancial information to support strategic and operational decisions, emphasizing topics such as cost-volume-profit analysis, variance analysis, and capital budgeting. By integrating case studies and real-world scenarios, the course prepares students to make informed managerial decisions and contribute to the overall efficiency and effectiveness of an organization.
Recommended Textbook Survey of Accounting 6th Edition by Carl S.
Warren
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15 Chapters
1713 Verified Questions
1713 Flashcards
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Chapter 1: The Role of Accounting in Business
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) The balance sheet represents the accounting equation.
A)True
B)False
Answer: True
Q2) A primary disadvantage of corporations is that the financial resources available to them are limited.
A)True
B)False
Answer: False
Q3) Cash investments made by the stockholders of the business are reported on the statement of cash flows in the:
A) financing activities section.
B) investing activities section.
C) operating activities section.
D) supplemental statement.
Answer: A
Q4) Creditors have preference to assets behind stockholders if a business fails.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Basic Accounting Concepts
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89 Verified Questions
89 Flashcards
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Sample Questions
Q1) When a notes payable account is paid in cash, the stockholders' equity in the business increases.
A)True
B)False
Answer: False
Q2) Equality of the accounting equation means that no errors have occurred.
A)True
B)False
Answer: False
Q3) It is possible for a transaction to change the makeup of assets, but to not affect assets in total.
A)True
B)False
Answer: True
Q4) For EFG Co., the transaction "billed a customer for fees earned" would:
A) increase total assets.
B) decrease total assets.
C) have no effect on total assets.
D) increase total liabilities.
Answer: A
Page 4
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Chapter 3: Accrual Accounting Concepts
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) Using accrual accounting, expenses are recorded and reported only:
A) when they are incurred, whether or not cash is paid.
B) when they are incurred and paid at the same time.
C) if they are paid before they are incurred.
D) if they are paid after they are incurred.
Answer: A
Q2) Accrued expenses are ordinarily reported on the balance sheet as:
A) assets.
B) liabilities.
C) fixed assets.
D) prepaid expenses.
Answer: B
Q3) ABN Company sold goods, receiving $20,000 in cash and $25,000 on credit. How much revenue should it record under the accrual basis of accounting?
A) $5,000
B) $25,000
C) $20,000
D) $45,000
Answer: D
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Page 5
Chapter 4: Accounting for Merchandising Businesses
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) The following data for the year ended June 30, 2013, were extracted from the accounting records of Roof Co.: \[\begin{array} { l l }
\$ 300,000 & \text { Cost of merchandise sold } \\ 95,000 & \text { Operating Espenses } \\ 450,000 & \text { Sales } \end{array}\] Prepare a multiple-step income statement for the current year ended June 30, 2013.
Q2) Gold Co. sold merchandise to Bronze Co. on account, $23,000, terms 2/15, net 45. The cost of the merchandise sold is $18,500. Gold Co. issued a credit memorandum for $2,500 for merchandise returned that originally cost $1,900. Bronze Co. paid the invoice within the discount period. What is the amount of net income earned by Gold Co. on the transactions?
Q3) Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense?
A) Selling expense
B) Miscellaneous expense
C) Administrative expense
D) Other expense
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Page 6
Chapter 5: Sarbanes-Oxley, Internal Control, and Cash
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Which of the following should not be considered cash by an accountant?
A) Money orders
B) Bank checking accounts
C) Postage stamps
D) Travelers' checks
Q2) Employing internal auditors is part of which element of internal control?
A) Monitoring
B) Control procedures
C) Risk assessment
D) Control environment
Q3) Using the following information, prepare a bank reconciliation for Salem Co. for May 31, 2013.
(a)The bank statement balance is \( \$ 2,597 \).
(b)The cash ac count balance is \( \$ 2,680 \).
(c)Outstanding checks amounted to \( \$ 703 \).
(d)Deposits in transit are \( \$ 732 \).
(e)The bank service charge is \( \$ 25 \).
(f)Interest ad ded to the che cking account by the bank is \( \$ 7 \).
(g)A check drawn for \( \$ 59 \) was incorrectly charged by the bank as \( \$ 95 \).
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Page 7
Chapter 6: Receivables and Inventories
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) Beginning inventory, purchases, and sales for Product XCX are as follows: \(\begin{array}{lllll}
\$ 12 \text { each } & \text { at } & 24 \text { units } & \text { Begiming Inventory } & \text { Oct. } 1 \\
\$ 14 \text { each } & \text { at } & 10 \text { units } & \text { Purchase } & \text { Oct. } 17 \\ & &52 \text { units } & \text { Sale } & \text { Oct. 30 } \end{array}\)
Assuming a periodic inventory system and the last-in, first-out method, determine (a) the cost of the merchandise sold for the October 30 sale and (b) the inventory on October 31.
Q2) The due date of a 60-day note dated July 12 is:
A) September 11.
B) September 8. C) September 9.
D) September 10.
Q3) Lower-of-cost-or-market is a method of inventory valuation. A)True B)False
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Page 8
Chapter 7: Fixed Assets and Intangible Assets
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) A fixed asset with a cost of $30,000 and accumulated depreciation of $25,000 is sold for $3,500. What is the amount of gain or loss on disposal of the fixed asset?
A) $2,500 loss
B) $1,500 loss
C) $2,500 gain
D) $1,500 gain
Q2) The balance in Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.
A)True
B)False
Q3) A patent was purchased for $670,000 with a legal life of 20 years. Management estimates that the patent has an 12-year economic life. The entry to record amortization would include:
A) an increase in amortization expense for $33,500.
B) an increase in research and development expense for $670,000.
C) a decrease in patent for $55,833.
D) an increase in accumulated amortization for $670,000.
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Chapter 8: Liabilities and Stockholders Equity
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) A corporation has 50,000 shares of $100 par value stock outstanding that has a current market value of $180. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately:
A) $30.
B) $36.
C) $45.
D) $50.
Q2) An employee receives an hourly rate of $27, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $350; cumulative earnings for year prior to current week, $99,700; social security tax rate, 6.0% on maximum of $106,800; and Medicare tax rate, 1.5% on all earnings. What is the gross pay for the employee?
A) $798.85
B) $873.77
C) $1,242.00
D) $1,323.00
Q3) For accounting purposes, stated value is treated the same way as par value.
A)True
B)False
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Page 10
Chapter 9: Financial Statement Analysis
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83 Verified Questions
83 Flashcards
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Sample Questions
Q1) The rate earned on total common stockholders' equity for most thriving businesses will be less than the rate earned on total assets.
A)True
B)False
Q2) Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 10%; therefore, the income tax expenses as a percentage of net sales must be 90%.
A)True
B)False
Q3) The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred as vertical analysis.
A)True
B)False
Q4) Statements in which all items are expressed as percentages with no dollar amounts are called common-sized statements.
A)True
B)False
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11
Chapter 10: Accounting Systems for Manufacturing Businesses
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Job order cost systems can be used to compare unit costs of similar jobs to determine if costs are staying within expected ranges.
A)True
B)False
Q2) If the cost of employee wages is not a significant portion of the total product cost, the wages are classified as factory overhead cost.
A)True
B)False
Q3) Bell Manufacturers Inc. has estimated total factory overhead costs of $60,000, and 10,000 direct labor hours for the current fiscal year. If job number 117 incurred 2,000 direct labor hours, the work-in-process account will be increased and factory overhead will be decreased by:
A) $10,000.
B) $0.
C) $12,000.
D) $2,000.
Q4) Direct labor cost is an example of a product cost.
A)True
B)False
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Chapter 11: Cost Behavior and Cost-Volume-Profit Analysis
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) If the volume of sales is $4,000,000 and sales at the break-even point amount to $3,200,000, the margin of safety will be 20%.
A)True
B)False
Q2) Costs that remain constant on a per-unit level as the level of activity changes are called:
A) fixed costs.
B) mixed costs.
C) opportunity costs.
D) variable costs.
Q3) Wiles Inc.'s unit selling price is $40, the unit variable costs is $30, fixed costs are $135,000, and current sales are 10,000 units. How much would operating income change if sales increase by 5,000 units?
A) $50,000 increase
B) $65,000 decrease
C) $100,000 increase
D) $50,000 decrease
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Chapter 12: Differential Analysis and Product Pricing
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99 Flashcards
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Sample Questions
Q1) The revenue that is forgone from an alternative use of an asset, such as cash, is called an opportunity cost.
A)True
B)False
Q2) Max, Inc. can sell a large piece of machinery for $90,000. The machinery originally cost $240,000 and has accumulated depreciation of $130,000. Max will have to pay a 5% sales commission on the sale. Rather than sell, Max is considering leasing the machine. It can be leased for 4 years for $24,000 per year. Max has estimated future operating expenses to be $3,000 per year, and Max will be responsible for those expenses. Which of the following options most accurately describes the analysis and decision for Max?
A) Lease - because differential revenues are $6,000 if Max leases rather than sells
B) Lease - because Max will lose $20,000 if it sells the equipment for less than its $110,000 book value
C) Sell - because differential income of selling rather than leasing is $6,000
D) Sell - because differential income is $1,500 if Max sells rather than leases
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Chapter 13: Budgeting and Standard Cost Systems
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168 Verified Questions
168 Flashcards
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Sample Questions
Q1) Which of the following budgets is prepared using the production budget?
A) Selling and administrative expenses
B) Direct materials purchases
C) Sales
D) Capital expenditures
Q2) Financial reporting systems that are guided by the principle of exceptions concept focus attention on variances from standard costs.
A)True
B)False
Q3) Employees view budgeting more positively when goals are established for them by senior management.
A)True
B)False
Q4) Using a standard costing system for nonmanufacturing expenses is easily administered because the expenses generally relate to a repetitive, measurable output.
A)True
B)False
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Chapter 14: Performance Evaluation for Decentralized Operations
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) If divisional income from operations is $75,000, invested assets are $637,500, and the minimum rate of return on the invested assets is 6%, the residual income calculated would be $36,750.
A)True
B)False
Q2) Sales commissions expense for a department store is an example of a direct expense.
A)True
B)False
Q3) Budget performance reports prepared for the vice-president of production would generally contain less detail than the reports prepared for the various plant managers. A)True
B)False
Q4) Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are termed indirect expenses.
A)True B)False
Page 16
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Chapter 15: Capital Investment Analysis
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103 Verified Questions
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Sample Questions
Q1) The amount of the estimated average income for a proposed investment of $60,000 in a fixed asset, giving effect to depreciation (straight-line method), with a useful life of four years, no residual value, and an expected total income yield of $22,300, is:
A) $10,800.
B) $5,575.
C) $5,400.
D) $15,000.
Q2) Periods experiencing increase in price levels are known as periods of:
A) inflation.
B) recession.
C) depression.
D) deflation.
Q3) For years one through five, a proposed expenditure of $400,000 for a fixed asset with a 5-year life has expected net income of $50,000, $40,000, $20,000, $20,000, and $20,000, respectively, and net cash flows of $130,000, $120,000, $100,000, $100,000, and $100,000, respectively. The cash payback period is 3.5years.
A)True
B)False
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Page 17