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PRELIMINARY EXAMINATION
MGMT ACCTG 1
MANAGEMENT ACCOUNTING
1. The discipline of accounting concerned with providing information to management in making decisions
about business operations.
a. Cost Accounting
c. Government Accounting
b. Financial Accounting
d. Management Accounting
2. Which of these information characteristics is deemed most important to management accounting?
a. Verifiability and Accuracy
c. Relevance, Flexibility and Timeliness
b. Comparability and Full Disclosure
d. Conservatism and substance over form
3. Which of the following characteristics does not relate to management accounting?
a. Accounting reports may include non-monetary information
b. It is subject to restrictions imposed by GAAP.
c. Reports are often based on estimates and are seldom useful for anything other than the purpose for
which they are prepared.
d. It provides data for internal users within the business organization.
4. In financial accounting, certain rules and regulations must be followed on how financial statements must
be presented to the reader. In managerial accounting, no such restrictions generally apply because it is:
a. An entirely different field that need not observe the broad guidelines in financial accounting.
b. Designed to provide management with non-financial information for decision-making.
c. Designed to provide accounting and other financial data to assist management in making business
decisions.
d. A discipline that does not require preparation of other financial statements
5. A practice in which a subordinate and a supervisor agree on goals and the methods of achieving them.
a. Management by objectives
c. Management by exception
b. Management by subjective
d. Management by example
6. Controllers are ordinarily not concerned with:
a. Preparation of tax returns
c. Protection of assets
b. Reporting to governments
d. Investor relations
7. Which of the following does not relate to management services by CPAs?
a. Design and/or installation of accounting systems.
b. Cost analysis of major investment decisions.
c. Financial analysis for project feasibility studies.
d. None of the above.
8. Which item is not an IMA Standard for Ethical Conduct for Management Accountants?
a. Competence
c. Loyalty
b. Integrity
d. Objectivity
9. The following characteristics refer to Financial Accounting except
a. Provides information to external users
b. Emphasizes on objective data
c. Has no externally imposed standards
d. Generates general purpose financial statements
10. All of the following statements are correct concerning line and staff position, except:
a. Both line and staff position functions are depicted in the organization chart
b. Line functions are directly related to the basic objectives of an organization
c. Persons occupying staff functions have authority over persons occupying line functions
d. None of the above
11. Which type of authority do management accountants generally exercise?
a. Functional
b. Company
c. Line
d. Staff
12. Which of the following is not an element of competency?
a. To refrain from engaging in an activity that would discredit the accounting profession
b. To develop appropriate knowledge and expertise about a particular subject
c. To perform duties in accordance with relevant laws and technical standards
d. To prepare clear reports after an analysis of relevant and reliable information
13. Obtaining feedback is generally identified most directly with the management function of
a. Planning
b. Directing and motivating c. Controlling
d. Decision Making
27. All of the following are potential financial benefits of just in time, except:
a. Reducing the risk of obsolescence
c. Lower investment in inventories
b. Reducing manufacturing lead time
d. Lower investments in plant space for inventories
28. The unyielding and continuing improving effort by everyone in the organization to understand, meet and
exceed the expectation of customers.
a. Just in time manufacturing
c. Total Quality Management
b. Conventional manufacturing
d. Total Quantity Management
29. Which of the following is at the core of the definition of TQM?
a. Customer Surveys
c. Reduced delivery charges
b. Continuous Improvement
d. Greater employee participation
30. In which of the following organization does TQM work best?
a. Hierarchal
c. Teams of people from the same specialty
b. Specialist working individually
d. Teams of people from different specialties
31. Which of the following quality tools is another term for continuous improvement?
a. Theory of constraints
b. Kaizen
c. Six-sigma
d. Lean manufacturing
32. Value chain is the sequence of business functions in which
a. Value is deducted from the products or services of an organization.
b. Value is proportionately added to the products or services of an organization
c. Products and services are evaluated with respect to their value to the supply chain
d. Usefulness is added to the products or services of an organization
33. In Process, Reengineering, two objectives are to simplify and to possibly eliminate
a. Value added activities
c. Constraint
b. Non-value added activities
d. Non-constraint
34. There are 4 broad classes of activities in the value chain. Billing activity is part of
a. Activities related to getting ready to make the product
b. Activities related to making the product
c. Activities related to dealing with customer
d. Other activities that support the first three activities
35. There are 4 broad classes of activities in the value chain. Research and Development is part of
a. Activities related to getting ready to make the product
b. Activities related to making the product
c. Activities related to dealing with customer
d. Other activities that support the first three activities
36. In financial statement analysis, expressing all financial statement items as a percentage of base year
amounts is called
a. Horizontal common-size analysis
c. Trend Analysis
b. Vertical common-size analysis
d. Ratio Analysis
37. Horizontal, vertical and common-size analysis are techniques that are used by analyst in understanding
the financial statements of companies. Which of the following is an example of vertical common-size
analysis?
a. Commission expense in 2013 is 10% greater than it was in 2012 which serves as a base year.
b. A comparison in financial ratio between two or more firms in the same industry.
c. A comparison in financial ratio between two or more firms in the different industries.
d. Commission expense in 2013 is 5% of net sales.
38. The statement of cash flows
a. Reports the revenues earned and expenses incurred by the firm during the period
b. Shows the companys total asset, liabilities and capital
c. Shows the companys capital structure for the period of time
d. Reports the periodic cash inflows and outflows in operating, investing and financing activities
39. Under the direct method of determining net cash provided by operating activities on the statement of cash
flows, a gain on the sale of plant assets would be:
a. Added to the amount of operating expenses reported under the accrual basis
b. Deducted from the amount of operating expenses reported under the accrual basis
c. Deducted from the amount of sales reported under the accrual basis
d. Totally ignored since the gain is not a part of sales, cost of goods sold, or operating expenses.
40. The income statement of Jollibee Company shows operating expenses of P265. The following
information is also available:
Prepaid expenses 1/1
P14
Prepaid expenses 12/31
21
Accrued expenses 1/1
40
Accrued expenses 12/31
36
a. 3.75 times
c. 5.00 times
b. 4.35 times
d. 5.80 times
69. Batik Clothing Store had a balance in the Accounts Receivable account of P390,000 at the beginning of
the year and a balance of P410,000 at the end of the year. The net credit sales during the year amounted
to P4,000,000. Using 360-day year, what is the average collection period of the receivables?
a. 30 days
c.
73 days
b. 65 days
d.
36 days
70. Deity Company had sales of P30,000, increase in accounts payable of P5,000, decrease in accounts
receivable of P1,000, increase in inventories of P4,000, and depreciation expense of P4,000. What was
the cash collected from customers?
a. P31,000
c.
P34,000
b. P35,000
d.
P25,000
71. During 2014, Tarlac Company purchased P960,000 of inventory. The cost of goods sold for 2014 was
P900,000, and the ending inventory at December 31, 2014 was P180,000. What was the inventory
turnover for 2014?
a. 6.4
c. 5.3
b. 6.0
d. 5.0
72. Selected information from the accounting records of Petals Company is as follows:
Net sales for 2014
P900,000
Cost of goods sold for 2014
600,000
Inventory at December 31, 2013
180,000
Inventory at December 31, 2014
156,000
Petals inventory turnover for 2014 is
a. 5.77 times
c. 3.67 times
b. 3.85 times
d. 3.57 times
73. The Moss Company presents the following data for 2007.
Net Sales, 2014
P3,007,124
Net Sales, 2013
P 930,247
Cost of Goods Sold, 2014
P2,000,326
Cost of Goods Sold, 2013
P1,000,120
Inventory, beginning of 2014
P 341,169
Inventory, end of 2014
P 376,526
The merchandise inventory turnover for 2014 is:
a. 5.6
c. 7.5
b. 15.6
d. 7.7
74. Based on the following data for the current year, what is the inventory turnover?
Net sales on account during year
P 500,000
Cost of merchandise sold during year
330,000
Accounts receivable, beginning of year
45,000
Accounts receivable, end of year
35,000
Inventory, beginning of year
90,000
Inventory, end of year
110,000
a. 3.3
c. 3.7
b. 8.3
d. 3.0
75. Selected information from the accounting records of Eternity Manufacturing Company follows:
Net sales
P3,600,000
Cost of goods sold
2,400,000
Inventories at January 1
672,000
Inventories at December 31
576,000
What is the number of days sales in average inventories for the year?
a. 102.2
c. 87.6
b. 94.9
d. 68.1
76. Net sales are P6,000,000, beginning total assets are P2,800,000, and the asset turnover is 3.0. What is
the ending total asset balance?
a. P2,000,000
c. P2,800,000
b. P1,200,000
d. P1,600,000
77. Jordan Manufacturing reports the following capital structure:
Current liabilities
Long-term debt
P100,000
400,000
2014
P250,000
a. 17%
c. 21%
b. 19%
d. 23%
84. Selected information from the accounting records of the Blackwood Co. is as follows:
Net A/R at December 31, 2013
P 900,000
Net A/R at December 31, 2014
P1,000,000
Accounts receivable turnover
5 to 1
Inventories at December 31, 2013
P1,100,000
Inventories at December 31, 2014
P1,200,000
Inventory turnover
4 to 1
What was the gross margin for 2014?
a. 150,000
c. 300,000
b. 200,000
d. 400,000
85. Recto Co. has a price earnings ratio of 10, earnings per share of P2.20, and a pay out ratio of 75%.
The dividend yield is
a. 25.0%
b. 22.0%
c. 7.5%
d. 10.0%
Items no. 86 to 96 are based on the following information. The following data pertains to Cerveza
Corporation
CERVEZA CORPORATION
Comparative Income Statement
This year
Sales (all on account)
452,000
Cost of goods sold
260,000
Gross Margin
192,000
Operating Expenses
104,000
Net Operating Income
88,000
Interest Expense
8,000
Net income before taxes
80,000
Income Taxes 30%
24,000
Net income
56,000
Last year
388,000
221,000
167,000
89,000
78,000
8,000
70,000
21,000
49,000
CERVEZA CORPORATION
Comparative Balance Sheet
This year
Last year
ASSETS
Current Assets
Cash
Marketable Securities
A/R, net
Inventory
Prepaid Expenses
Total Current Assets
42,000
32,000
84,000
96,000
11,000
265,000
21,000
28,000
102,000
70,000
9,000
230,000
410,000
675,000
380,000
610,000
LIABILITIES
Current Liabilities
Bonds Payable, 10%
TOTAL LIABILITIES
115,000
80,000
195,000
90,000
80,000
170,000
SHAREHOLDERS EQUITY
Preferred Stock, P100 par, 7%
Common Stock, P5 par
Retained Earnings
TOTAL SHAREHOLDERS EQUITY
TOTAL LIABILITIES AND EQUITY
100,000
300,000
80,000
480,000
675,000
100,000
300,000
40,000
440,000
610,000
*In addition to the preferred dividends, dividend of P0.15 per share were declared and paid on the common
stock this year
86. Using vertical analysis, what percent would be shown for retained earnings at the end of this year
a. 9.3%
b. 11.9%
c. 16.7%
d. 17.7%
87. Dividend pay-out ratio for this year is:
a. 18.4%
b. 3.0%
c. 11.2%
d. 16.1%
88. Return on total asset for this year is:
a. 7.3%
b. 7.6%
c. 8,7%
d. 9.6%
89. Return on common stockholders equity for this year is:
a. 12.9%
b. 13.6%
c. 15.6%
c. 16.2%
90. Book Value per share at the end of this year is:
a. 6.00
b. 6.33 c. 7.67
d. 8.00
91. Current ratio at the end of this year is:
a. 1.36
b. 1.77 c. 2.30
d. 2.41
92. Acid-test ratio at the end of this year is:
a. 0.64
b. 0.77 c. 0.81
d. 1.37
93. Cervezas accounts receivable turnover for this year is:
a. 67.8 days
b. 75.1 days c. 80.8 days
d. 117.9 days
94. Cervezas inventory turnover is:
a. 67.0 days
b. 116.5 days c. 126.0 days
d. 134.8 days
95. Cervezas times interest earned for this year is:
a. 6.125
b. 7
c. 10
d. 11
96. Cervezas debt-to-equity ratio at the end of this year is:
a. 0.24
b. 0.29 b. 0.41
d. 0.51
Items no. 93 to 96 are based on the following information. The following data pertains to Parsons
Company
Sales
Cash
Accounts Receivable
Inventory
Prepaid Expenses
Total Current Assets
Year 4
800,000
35,000
75,000
78,000
47,000
235,000
Year 3
700,000
30,000
50,000
75,000
39,000
194,000
Year 2
600,000
24,000
58,000
80,000
11,000
173,000
Year 1
570,000
18,000
45,000
75,000
25,000
163,000
97. Using Year 2 as the base year, Cash for the year 3 expressed as a trend percentage would be closest to:
a. 167%
b. 133%
c. 120%
d. 125%
98. Using Year 1 as the base year, Sales for the year 4 expressed as a trend percentage would be closest to:
a. 140%
b. 114%
c. 71%
d. 133%
99. Using Year 2 as the base year, Inventory for the year 3 expressed as a trend percentage would be closest
to:
a. 40%
b. 94% c. 100%
d. 107%
100. Using common size statements to analyze changes in current assets. The increase or decrease in the
Prepaid Expenses account with Year 4 when compared to Year 3 would be closest to:
a. 254% increase
b. 20.5% decrease
c. 20.5% increase
d. 254% decrease