Managerial and Financial Accounting
Exam Answer Key
Course Introduction
Managerial and Financial Accounting is a comprehensive course designed to introduce students to the principles, methods, and applications of both managerial and financial accounting. The course covers key concepts such as financial statement preparation and analysis, cost behavior, budgeting, performance evaluation, and decision-making processes relevant to internal management as well as external stakeholders. Emphasis is placed on understanding how accounting information supports planning, controlling, and strategic management in organizations, as well as meeting regulatory reporting requirements. Students will gain practical skills in interpreting and utilizing accounting data to make informed business decisions and drive organizational success.
Recommended Textbook
Financial Accounting 7th Edition by Libby Libby
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14 Chapters
1652 Verified Questions
1652 Flashcards
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Chapter 1: Financial Statements and Business Decisions
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124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/58122
Sample Questions
Q1) Describe the roles of the Securities & Exchange Commission and The Financial Accounting Standards Board with respect to the development of Generally Accepted Accounting Principles.
Answer: Answer will vary
Q2) Which of the following is not one of the three steps taken by a corporation to assure the accuracy of its records?
A)Implementing a system of internal controls.
B)The hiring of an independent auditor to report on the fairness of the financial statements.
C)The hiring of a financial analyst.
D)The formation of a committee made up of board of directors' members to oversee the integrity of its safeguards utilized.
Answer: C
Q3) The auditor can be held liable for malpractice in situations where the investors suffered losses while relying on the financial statements.
A)True
B)False
Answer: True
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3
Chapter 2: Investing and Financing Decisions and the Balance Sheet
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Which of the following would result when a company sells additional shares of stock for cash?
A)A noncurrent liability and a financing cash flow are created.
B)Contributed capital increases and a financing cash flow results.
C)A noncurrent liability and an investing cash flow are created.
D)Contributed capital increases and an investing cash flow results.
Answer: B
Q2) Why is the separate-entity assumption so important for balance sheet reporting?
Answer: Answers will vary
Q3) Current assets include accounts receivable and prepaid expenses.
A)True
B)False
Answer: True
Q4) Where would changes in stockholders' equity resulting from operations be reported?
A)Within a long-term asset account.
B)Within the contributed capital account.
C)Within a liability account.
D)Within the retained earnings account.
Answer: D
To
4
Chapter 3: Operating Decisions and the Income Statement
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) On December 31,2010,Avery Corporation paid $10,000 for next year's insurance policy.This transaction should be recorded as follows by Avery:
A) Insurance Expense\( \quad \)\( \quad \)10,000
\( \quad \)Insurance Payable\( \quad \)\( \quad \)\( \quad \)\( \quad \)\( \quad \)10,000
B) Prepaid Insurance\( \quad \)\( \quad \)\( \quad \)10,000 \( \quad \)Insurance Payable\( \quad \)\( \quad \)\( \quad \)\( \quad \)\( \quad \)\( \quad \)10,000
C) Prepaid Insurance\( \quad \)\( \quad \)10,000 \( \quad \)Cash\( \quad \)\( \quad \)\( \quad \)\( \quad \)\( \quad \)\( \quad \)\( \quad \)\( \quad \)\( \quad \)10,000
D) Insurance Payable\( \quad \)\( \quad \)10,000 \( \quad \)Cash\( \quad \)\( \quad \)\( \quad \)\( \quad \)\( \quad \)\( \quad \)\( \quad \)\( \quad \)\( \quad \)10,000
Answer: C
Q2) Describe the operating activities section of the cash flow statement and provide three examples of operating activities cash flows.
Answer: Answers will vary
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Page 5
Chapter 4: Adjustments,Financial Statements,and the
Quality of Earnings
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) What is the effect on the financial statements when a company fails to accrue salaries expense at year-end?
A)Net income is overstated and liabilities are understated.
B)Expenses are understated and stockholders' equity is understated.
C)Expenses and liabilities are both overstated.
D)Net income is overstated and liabilities are not affected.
Q2) The trial balance is a listing of account balances that are found in the general ledger.
A)True
B)False
Q3) Closing the expense and loss accounts at year-end requires that these accounts be debited.
A)True
B)False
Q4) Which of the following account balances would not be affected by closing journal entries?
A)Interest expense
B)Accumulated depreciation
C)Dividends
D)Retained earnings
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Chapter 5: Communicating and Interpreting Accounting Information
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) The summary of significant accounting policies is a required financial statement disclosure.
A)True
B)False
Q2) Which of the following statements is false?
A)The board of directors meets with the external auditors to discuss management's compliance with their financial reporting obligations.
B)The external auditors are selected by the Securities & Exchange Commission (SEC).
C)The Securities & Exchange Commission (SEC) requires publically traded companies to have their financial statements audited by an independent accountant.
D)The external auditors assume some responsibility with respect to the fairness of the financial statements.
Q3) Which of the following would not be a component of income from operations?
A)Gross profit
B)Selling and administrative expenses
C)Dividend income
D)Research and development expense
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Page 7
Chapter 6: Reporting and Interpreting Sales Revenue, Receivables,
and Cash
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123 Verified Questions
123 Flashcards
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Sample Questions
Q1) What are "cash equivalents"? Specifically where would they appear on the financial statements?
Q2) Redwing Company sold inventory costing $500 to a customer on account for $700.Which of the following does not correctly describe the collection of $686 cash when the customer takes advantage of a discount?
A)Gross profit decreases $14.
B)Accounts receivable decreases $700.
C)Current assets decrease $14.
D)Operating income is not affected.
Q3) A company sells magazines and collects subscription fees prior to the publication and distribution of the magazine.Which of the following correctly describes the impact on the financial statements when cash is received in advance from customers?
A)Current assets increase and gross profit increases.
B)Current liabilities aren't affected and stockholders' equity isn't affected.
C)Current assets increase and stockholders' equity increases.
D)Current liabilities increase and gross profit is not affected.
Q4) The gross profit percentage is calculated by dividing net sales by gross profit. A)True B)False
Page 8
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Chapter 7: Reporting and Interpreting Cost of Goods Sold and Inventory
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127 Flashcards
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Sample Questions
Q1) The LIFO inventory method will result in the highest gross margin when costs are increasing in comparison to the specific identification,FIFO and weighted average inventory methods.
A)True
B)False
Q2) Inventory inspection costs incurred at the time of purchase are reported as operating expenses on the income statement.
A)True
B)False
Q3) A company provided the following data:
Sales,$500,000; beginning inventory,$40,000; ending inventory,$45,000; and gross margin,$150,000.What was the amount of inventory purchased during the year?
A)$370,000
B)$355,000
C)$348,000
D)$341,000
Q4) Inventory turnover under LIFO is greater than inventory turnover under FIFO when prices are increasing.
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Chapter 8: Reporting and Interpreting Property, Plant, and Equipment; Natural Resources; and Intangibles
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) Research and development costs are capitalized under GAAP once a product or process has been developed.
A)True
B)False
Q2) When determining cash flow from operations using the direct method,depreciation and amortization expense are deducted from net income.
A)True
B)False
Q3) Which of the following statements is false?
A)The book value at the end of an asset's useful life will be the same under all the depreciation methods allowed under GAAP.
B)The balance in the accumulated depreciation account will be the same at the end of an asset's useful life under all the methods allowed under GAAP.
C)Once you select a depreciation method, then you must use this method for all depreciable assets.
D)The annual depreciation expense and year-end book values will differ under the various depreciation methods over the life of the asset.
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Page 10
Chapter 9: Reporting and Interpreting Liabilities
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) Purdum Farms borrowed $10 million by signing a five year note on January 1,2010 and repayments of the principal are payable annually in $2 million installments.Purdum Farms makes the first payment December 31,2010 and then prepares its balance sheet.What amount will be reported as current and long-term liabilities respectively in connection with the note at December 31,2010?
A)$2 million in current liabilities and $8 million in long-term liabilities.
B)$2 million in current liabilities and $6 million in long-term liabilities.
C)Zero in current liabilities and $8 million in long-term liabilities.
D)Zero in current liabilities and $10 million in long-term liabilities.
Q2) Rudy Corporation is looking to purchase a building costing $500,000 by paying $100,000 cash on the purchase date,and agreeing to make annual payments for the next ten years; the first payment is due one year after the purchase date.Rudy's incremental borrowing rate is 10%.How much will each of the annual payments be?
A)$65,098
B)$86,821
C)$55,098
D)$44,000
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Chapter 10: Reporting and Interpreting Bonds
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) Assuming no adjusting journal entries have been made,the journal entry to record the cash interest payment on the due date for bonds issued at a discount results in which of the following?
A)An increase in expenses and a decrease in liabilities.
B)An increase in expenses and an increase in liabilities.
C)A decrease in both liabilities and stockholders' equity.
D)A decrease in both assets and liabilities.
Q2) Which of the following statements doesn't correctly describe the accounting for bonds that were issued at a discount?
A)The interest expense over the life of the bond exceeds the cash interest payments.
B)The interest expense over the life of the bonds increases as the bonds mature when the effective interest method is used.
C)The amortization of the discount on bonds payable account decreases as the bonds mature when the effective interest method is used.
D)The book value of the bond liability increases when interest payments are made on the due dates when the effective interest method of amortization is used.
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Chapter 11: Reporting and Interpreting Owners Equity
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Sample Questions
Q1) When a company pays its previously declared cash dividend,an investing cash outflow is reported.
A)True
B)False
Q2) The declaration and payment of a cash dividend
A)reduces retained earnings and increases liabilities by the amount of the dividend.
B)reduces retained earnings and increases contributed capital by the same amount.
C)reduces assets and increases liabilities by the amount of the dividend.
D)reduces both assets and retained earnings by the amount of the dividend.
Q3) A stock dividend
A)results in a transfer of retained earnings to contributed capital.
B)increases the number of shares outstanding and involves a pro rata reduction in the par value per share.
C)is accounted for in exactly the same manner as a stock split.
D)results in a transfer of retained earnings to contributed capital and also increases the number of shares outstanding and involves a pro rata reduction in the par value per share.
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Chapter 12: Reporting and Interpreting Investments in Other Corporations
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Miller Corp.purchased $1,000,000 of bonds at 105.The bonds pay interest at the rate of 10%.Miller intends to hold these bonds to maturity.Which of the following statements is false?
A)Since the bonds were issued at a premium, the cash interest will be greater than interest revenue.
B)Since the bonds were issued at a premium, the book value of the bond investment will decrease.
C)The bond investment must be accounted for using the held-to-maturity classification.
D)The company would recognize unrealized gains or losses on the bonds under the fair value approach within the income statement.
Q2) An unrealized holding gain is reported on the income statement when the fair value of an available-for-sale security exceeds its cost.
A)True
B)False
Q3) Discuss how the equity method prevents managers of the investor corporation from manipulating income related to dividends from the investee.
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Page 14
Chapter 13: Statement of Cash Flows
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) A Company reported net income of $200,000 during 2010.The company reported depreciation expense of $35,000,patent amortization of $10,000 and a $5,000 loss on the sale of equipment.Based on the information provided,how much is the company's cash flow from operating activities?
A)$245,000
B)$250,000
C)$240,000
D)$235,000
Q2) Allen Company's 2010 income statement reported total revenues,$850,000 and total expenses (including $40,000 depreciation)of $720,000.The 2009 balance sheet reported the following:
Accounts receivable-beginning balance,$50,000 and ending balance,$40,000; accounts payable-beginning balance,$22,000 and ending balance,$28,000.Therefore,based only on this information,how much was the 2010 net cash inflow from operating activities?
A)$126,000
B)$166,000
C)$174,000
D)$186,000
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Chapter 14: Analyzing Financial Statements
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Sample Questions
Q1) Agnes Company reported the following data: \[\begin{array} { l r }
\text { Quick assets } & \$ 55,000 \\
\text { Current assets } & 150,000 \\
\text { Total liabilities } & 300,000 \\
\text { Average net receivables } & 12,600 \\
\text { Beginning inventory } & 38,000 \\
\text { Long-term liabilities } & 200,000 \\
\text { Net credit sales } & 126,000 \\
\text { Cost of goods sold } & 84,000 \\
\text { Ending inventory } & 46,000
\end{array}\] What was the current ratio?
A)0.5
B)1.5
C)2.5
D)0.75
Q2) Finding comparable companies in order to compare performance is important because ratios in isolation are difficult to evaluate.
A)True
B)False
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