Question 1

Which of the following best describes the primary difference between financial accounting and managerial accounting?

Accepted Answer

Financial accounting provides information to external users, while managerial accounting provides information to internal users.

Question 2

A company is considering two investment projects. Project A requires an initial investment of $$50,000 and will generate 15$$,000 per year for 5 years. Project B requires $$50,000 and will generate 20$$,000 per year for 3 years. Using the payback period method, which project should the company choose?

Accepted Answer

Project A, because its payback period is $$\frac{\50$$,000}{\$$15,000} = 3.33$$ years.

Question 3

Which of the following is a sunk cost?

Accepted Answer

The original purchase price of equipment that is already owned.

Question 4

A company has the following data: Sales = $$100,000, Cost of Goods Sold = 60$$,000, Operating Expenses = $25,000. What is the net income?

Accepted Answer

Net Income = $$100,000 - 60$$,000 - $$25,000 = 15$$,000$

Question 5

Which of the following costs is considered a product cost in a manufacturing company?

Accepted Answer

Direct labor used in production.

Question 6

A company wants to calculate the break-even point in units. If fixed costs are $$40,000, variable cost per unit is 8$$, and selling price per unit is $12, what is the break-even point?

Accepted Answer

Break-even units = $$\frac{\40$$,000}{\$$12 - \8$$} = 10,000$ units

Question 7

Which of the following is NOT included in manufacturing overhead?

Accepted Answer

Direct materials used in production.

Question 8

A company is preparing its master budget. What is typically the first step?

Accepted Answer

Preparing the sales budget.

Question 9

If a company declares a cash dividend, which journal entry is correct?

Accepted Answer

Debit Dividends, Credit Dividends Payable

Question 10

A company has total assets of $$500,000, total liabilities of 200$$,000, and paid-in capital of $100,000. What is the total stockholders’ equity?

Accepted Answer

Stockholders’ equity = $$500,000 - 200$$,000 = $$300,000$$

Question 11

Which section of the Statement of Cash Flows would include cash paid for equipment purchases?

Accepted Answer

Investing activities

Question 12

A company is considering replacing old equipment with new equipment. The old equipment has no salvage value and will not affect future cash flows. Which costs are relevant to the decision?

Accepted Answer

The cost of the new equipment and any changes in future cash flows.

Question 13

A company has the following information: Beginning Inventory = $$10,000, Purchases = 25$$,000, Ending Inventory = $8,000. What is the Cost of Goods Sold?

Accepted Answer

COGS = $$10,000 + 25$$,000 - $$8,000 = 27$$,000$

Question 14

Which of the following best describes the time value of money?

Accepted Answer

A dollar today is worth more than a dollar in the future due to its earning potential.

Question 15

A company has variable costs of $$5 per unit and fixed costs of 20$$,000. If 4,000 units are produced, what is the total cost?

Accepted Answer

Total cost = $$20,000 + (4,000 	imes 5) = 20$$,000 + $$20,000 = 40$$,000$

Question 16

A company needs to budget for inventory purchases. If budgeted sales are 10,000 units, desired ending inventory is 2,000 units, and beginning inventory is 1,500 units, how many units should be purchased?

Accepted Answer

Units to purchase = $$10,000 + 2,000 - 1,500 = 10,500$$ units

Question 17

Which of the following is an example of a mixed cost?

Accepted Answer

A utility bill with a fixed monthly charge plus a variable charge based on usage.

Question 18

A company is analyzing a short-term business decision. Which costs should be considered?

Accepted Answer

Only costs that will change as a result of the decision (relevant costs).

Question 19

A company is preparing a cash budget. If expected cash receipts are $$80,000 and expected cash payments are 65$$,000, what is the expected net cash flow?

Accepted Answer

Net cash flow = $$80,000 - 65$$,000 = $$15,000$$

Comprehensive Study Notes for Financial and Managerial Accounting

Study Guide - Practice Questions

Study Guide - Flashcards