1.

Managerial accounting is designed for use by:

a. Internal user
b. Stockbrokers
c. External user
d. Clients
2. The goal of managerial accounting is to provide the information that managers need for all
of the following EXCEPT:
a. Planning
b. Control
c. Decision Making
d. Review
3. Management accounting
a. Provides information that is generally available only on a quarterly or annual basis.
b. Focuses on estimating future revenues, costs, and other measures to forecast
activities and their results.
c. Reports information that has occurred in the past that is verifiable and reliable.
d. Provides information about the company as a whole
4. The person most likely to use management accounting information is a(n)
a. Assembly department supervisor
b. Banker evaluating a credit application
c. Shareholder evaluating a stock investment
d. Governmental taxing authority
5. Which of the following description refers to management accounting information?
a. It is verifiable and reliable
b. It is driven by rules
c. It is prepared for shareholders
d. It provides reasonable and timely estimates
6. Which of the following groups would be LEAST likely to receive detailed management
accounting reports?
a. Stockholders
b. Sales Representative
c. Productions Supervisors
d. Managers
7. Financial accounting provides a historical perspective, whereas management accounting
emphasizes
a. the future
b. past transactions
c. a current perspective
d. reports to shareholders
8. Management Accounting is considered successful when it
a. Helps creditors evaluate the company’s performance
b. Help managers improve their decisions
 c. Is accurate
d. Is relevant and reported annually
9. Responsibility of a CFO include all EXCEPT
a. providing report to shareholders
b. managing short-term and long-term financing
c. investing in new equipment
d. preparing tax returns
10. Which of the following is a basic feature of a managerial accounting system?
a. The scope tends to be aggregate
b. There are no regulations governing the reports
c. The reports are generally delayed and historical
d. The audience tends to be stockholders and creditors
11. What are the basic financial statements provided in an annual report
a. Balance sheet and Income statement
b. Statement of financial earnings and statement of equity
c. Balance sheet, income statement, cash flow statement and statement in changes in
equity
12. What is the function of a cash flow statement?
a. To provide information about cash receipts and payments during an accounting
period
b. To provide information about the operating, investing and financing for an
accounting period.
c. To reconcile the beginning and ending balance of all equity accounts
d. Both a and b
13. What items are included in the notes to financial statements?
a. Summary of accounting policies
b. Changes in accounting policies, if any
c. Detail about particular account
d. All of the above
14. What does the balance sheet summarize for a business?
a. Financial position at a point in time
b. Operating results for a period
c. Financing and investing activities for a period
d. Profit or loss at a point of time
15. What does income statement measure for a firm?
a. Financing and investing activities for a period
b. Changes in assets and liabilities occurred during a period
c. Results of operation for a period
d. Financial position of a firm for a period
16. The Statement of Cash Flows segregates cash inflows and outflows by:
a. Operating and financing activities
b. Financing and investing activities
c. Operating and investing activities
d. Operating, investing and financing activities
 17. How would payment for taxes be classified?
a. Operating Inflow
b. Operating outflow
c. Investing outflow
d. Financing outflow
18. How would the repayment of debt be classified?
a. Operating Inflow
b. Operating outflow
c. Investing outflow
d. Financing outflow
19. Which of the following assets will not be depreciated over its service life?
a. Furniture
b. Buildings
c. Equipment
d. Land
20. Which if the following cause a change in the retained earnings account balance?
a. Payment of dividends
b. Prior period adjustment
c. Net profit or loss
d. All of the above
21. What does cash account include?
a. Cash in bank accounts
b. Cash awaiting deposit
c. Both a and b
d. None of the above
22. Which of the following is not a common tool used in financial statement analysis?
a. Random walk analysis
b. Ratio analysis
c. Common size statement analysis
d. Trend series analysis
23. Which of the following statements concerning financial ratios is incorrect?
a. Accounting principles and methods used by a company will not affect financial
ratios
b. The informational value of a ration in isolation is limited
c. A ratio is one one number expressed as a percentage or fraction of another number
1. Which of the following ratios is not generally considered to be helpful in assessing short-term
liquidity?
a. Acid test ratio
b. Current ratio
c. Days to collect receivables
d. Days goodwill held
2. Liquidity of a company s generally defined a s a measure of
a. The ability of company to pay its employees in a timely manner
b. The ability to pay interest and principal on all debt
 c. The ability to pay dividend
d. The ability to pay current liabilities
3. You have been provided the following information about Wert Inc

a. 13.71%
b. 12.68%
c. 10.77%
d. 13.21%

You have been provided the following information about High Inc.

4. Working capital for 2005 is:

a. 56,000
b. 20,000
c. 151,000
d. 207,000
5. Owner’s equity for 2006 is:
a. 20,000
b. 154,000
c. 174,000
d. 207,000
6. Current ratio for 2005 is:
a. 1.55
b. 1.51
c. 1.50
d. 1.14
7. Return on common equity for 2006 is:
a. 15.46%
b. 24.14%
c. 16.79%
 d. 22.04%
8. Which of the following ratios would be considered useful in assessing in operating
profitability?
a. Debt/Equity ratio
b. Acid test ratio
c. Gross profit margin
d. Return on equity
9. Which of the following would not be considered a source of financing
a. Notes receivable
b. Common stockholder’s equity
c. Retained earnings
d. Debentures
10. While determining the most profitable company from the given number of companies, which
of the following would be the best indicator of relative profitability?
a. Highest net income
b. Highest retained earnings
c. Highest return on equity
d. Highest operating margin
11. Which of the following ratios does not relate to market price of a company under analysis?
a. Price-to-earnings
b. Earning yield
c. Price-to-book
d. Return on common equity
12. Which of the following is likely to be most informative source if you were interested in a
company’s business plan or strategy?
a. Auditor’s letter
b. Management discussion and analysis
c. Proxy statement
d. Footnotes

Problem 1. FINANCIAL STATEMENT RECONSTRUCTION AND ANALYSIS

The trial balance of Palicio Security Services Inc. as of January 1, 2016 had the
following normal balances:

Cash 74,210
Accounts receivable 13,500
Supplies 200
Prepaid rent 3,200
Merchandise inventory (24 @ $265; 1 @ $260) 6,620
Land 4000
Accounts payable 1,950
Unearned revenue 980
Salaries payable 1,000
Common stock 50,000
Retained earnings 47,800

The following transactions took place during 2016 for Palicio Security Services:
1. Paid the salaries payable from 2015.
2. On March 1, 2016, Palicio established a $100 petty cash fund to handle small
expenditures.
3. Paid $4,800 on May 1, 2016, for one year's lease on the company van in
advance.
4. Paid $7,200 on May 2,2016 for one year's office rent in advance.
5. Purchased $400 of supplies on account.
6. Purchased 100 alarm systems for $28,000 cash during the year.
7. Sold 102 alarm systems for $57,120. All sales were on account.
(Compute cost of goods sold using the FIFO cost flow method)
8. Paid $2,100 on accounts payable during the year.
9. Replenished the petty cash fund on August 1. At this time, the petty cash fund
had only $7 of currency left. It contained the following receipts: office supplies
expense $23, cutting grass $55, and miscellaneous $14.
10. Billed $52,000 of monitoring services for the year.
11. Paid installers and other employees a total of $25,000 cash for salaries.
12. Collected $89,300 of accounts receivable during the year.
13. Paid $3,600 of advertising expense during the year.
14. Paid $2,500 of utilities expense for the year.
15. Paid a dividend of $10,000 to the shareholders.

Required:
1. Prepare the trial balance as at Dec 31, 2016 for Palicio Security Services Inc.
2. Prepare the income statement, statement of changes in equity and balance
sheet for Palicio Security Services Inc.
3. Compute for the following ratios. (Based on Adjusted Financial Statements,
December 31, 2016)
A. Current Ratio
B. Acid-test or Quick Ratio
C. Working capital
D. Debt Ratio
E. Equity Ratio
F. Gross profit margin
G. Operating margin
H.
I. Net profit margin

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