# Midterm Exam – Management Accounting for the Hospitality Industry

Question 1

2.5 / 2.5 pts
The three major categories included on the statement of cash flows are ________.

investing, capital, and financing activities

financial, operating, and internal control activities

investing, operating, and contracting activities

investing, operating, and financing activities
Question 2

2.5 / 2.5 pts
Which of the following formulas represent cost of goods sold for a merchandising business?
Purchases and Freight In + Ending Merchandise Inventory = Cost of Goods Sold

Beginning Merchandise Inventory – Ending Merchandise Inventory = Cost of Goods Sold

Ending Merchandise Inventory + Purchases and Freight In – Beginning Merchandise Inventory = Cost of Goods Sold

Beginning Merchandise Inventory + Purchases and Freight In – Ending Merchandise Inventory = Cost of Goods Sold
Question 3

2.5 / 2.5 pts
The asset account, Office Supplies had a beginning balance of \$5,300. During the accounting period, office supplies were purchased, on account, for \$5,500. A physical count, on the last day of the accounting period, shows \$2,800 of office supplies on hand. What is the amount of Supplies Expense for the accounting period?
\$8,000

\$5,500
\$2,600
\$2,500
Question 4

2.5 / 2.5 pts
Which of the following is used to determine how the sales revenue of a company has changed from one year to the next?

horizontal analysis of the balance sheet

horizontal analysis of the income statement

vertical analysis of the balance sheet

vertical analysis of the income statement
Question 5

2.5 / 2.5 pts

The financial statements for Silver Service Company include the following items:

 ​ 2019 2018 ​ ​ ​ Cash \$50,500 \$42,000 Short-term Investments 26,000 14,500 Net Accounts Receivable 52,000 48,000 Merchandise Inventory 131,000 51,000 Total Assets 532,000 548,000 Accounts Payable 132,500 127,000 Salaries Payable 16,000 16,000 Long-term Note Payable 57,000 57,000 ​ ​ ​

Compute the acid-test ratio for 2018. (Round your answer to two decimal places)

0.63

0.73

0.82

0.87
Question 6

2.5 / 2.5 pts
When performing vertical analysis of an income statement, the base amount is ________.

sales revenue

total expenses

net sales revenue

gross profit
Question 7

2.5 / 2.5 pts

Allstate Moving Company reported the following amounts on its balance sheet as of December 31, 2019 and December 31, 2018:

 ​ 2019 2018 Cash and Receivables \$75,000​ \$145,000​ Merchandise Inventory 175,000​ 250,000​ Property, Plant and Equipment, net 820,000​ 710,000​ Total Assets \$1,070,000​ \$1,105,000​ Total Liabilities \$455,000​ \$405,000​

For the vertical analysis, what is the percentage of current assets as of December 31, 2019? (Round your answer to two decimal places.)

23.36%
Vertical analysis % = (Specific item / Base amount) × 100
Vertical analysis % = [(\$75,000 + 175,000)/ \$1,070,000]× 100
Vertical analysis % = 23.36%

30.49%

55.63%

35.75%
Question 8

2.5 / 2.5 pts
Which of the following sections of the statement of cash flows includes activities that increase and decrease long-term liabilities anthe investing activities section

change in cash section

the financing activities section

the operating activities section
Question 9

2.5 / 2.5 pts
Which of the following statements is true of managerial accounting?

An external audit by an independent CPA is required for managerial accounting information.

Managerial accounting information must comply with Generally Accepted Accounting Principles.

The external stakeholders of a company are the primary users of managerial accounting.

Managerial accounting information is used to help managers plan, direct and control their operations.
Question 10

2.5 / 2.5 pts
Adjusting journal entries are prepared ________.
after preparing the financial statements

after posting the closing entries

after preparing the adjusted trial balance

after preparing the unadjusted trial balance
Question 11

2.5 / 2.5 pts
Assets that are expected to be converted to cash, sold, or used up during the next 12 months, or within the business’s normal operating cycle if the cycle is longer than a year, are called ________ assets.

long-term

intangible

current

plant
Question 12

2.5 / 2.5 pts
Under which of the following categories would Accounts Payable appear?

Current liabilities

Current assets

Long-term liabilities

Long-term assets
Question 13

2.5 / 2.5 pts
Brownstone, Inc. has a current ratio of 6.00. This indicates that the company has \$6 in ________.

total assets for every \$1 of current liabilities

current liabilities for every \$1 of current assets

total assets for every \$1 of current assets

current assets for every \$1 of current liabilities
Question 14

2.5 / 2.5 pts
Which of the following statements accurately describes the statement of cash flows?

It is the link between the accrual-based income statement and the cash reported on the balance sheet.

It indicates when long-term debt will mature.

It shows the relative proportion of debt and assets.

It is the link between net income and earnings per share.
Question 15

2.5 / 2.5 pts
Costs are transferred from the balance sheet to the income statement as cost of goods sold when ________.

direct materials, direct labor and manufacturing overhead are transferred to the beginning Work-in-Process Inventory account

the total of Cost of Goods Manufactured is determined

finished goods are sold

goods are transferred from the Work-in-Process Inventory account to the Finished Goods Inventory account
Question 16

2.5 / 2.5 pts
Which of the following statements is true of the direct and indirect methods of preparing the statement of cash flows?
There is no difference in the way the operating activities section is presented.

The investing activities section is the only section that differs between the direct and indirect methods.

The indirect method and the direct method will produce the same amount of net cash provided by operating activities.

The indirect method shows three types of cash flows, but the direct method does not.
Question 17

2.5 / 2.5 pts
Salaries Payable, Accounts Payable, and Unearned Revenue are examples of ________.

long-term liabilities

fixed assets

short-term investments

current liabilities
Question 18

2.5 / 2.5 pts

The following is a summary of information presented on the financial statements of a company on December 31, 2019.

 Account 2019 2018 Net Sales Revenue \$607,000​ \$502,000​ Cost of Goods Sold 450,000​ 406,000​ Gross Profit 157,000​ 96,000​ Selling Expenses 54,000​ 52,000​ Net Income Before Income Tax Expense 103,000​ 44,000​ Income Tax Expense 38,000​ 24,000​ Net Income \$65,000​ \$20,000​

With respect to net sales revenue, a horizontal analysis reveals ________.

a 20.92% increase in net sales revenue
 Increase (Decrease)
 2019 2018 Amount Percentage
 Net sales revenue \$607,000​ \$502,000​ \$105,000​ 20.92

a \$44,000 increase in net sales revenue

a decrease of \$44,000 in net sales revenue

a 240.62% decrease in net sales revenue
Question 19

2.5 / 2.5 pts

The financial statements of Carrier Office Furniture Company include the following items:

 ​ 2019 2018 ​ ​ ​ Cash \$42,500 \$42,000 Short-term Investments 28,000​ 19,000 Net Accounts Receivable 102,000​ 98,000 Merchandise Inventory 166,000​ 148,000 Total Assets 527,000​ 547,000 Total Current Liabilities 273,000​ 285,000 Long-term Note Payable 64,000​ 60,000 ​ ​ ​

What is working capital for 2019?

Correct!

\$65,500
Working capital = Current assets – Current liabilities
Working capital = (Cash \$42,500 + Short-term Investments \$28,000 + Net Accounts Receivable \$102,000 + Merchandise Inventory \$166,000) – \$273,000
Working Capital = \$338,500 – \$273,000
Working Capital = \$65,500

\$100,500

\$190,000

\$37,500
Question 20

2.5 / 2.5 pts
To match expenses against revenues means to ________.

subtract expenses incurred during one period from revenues earned during that same period

add expenses incurred during one period to revenues earned during the previous period

subtract expenses incurred during one period from revenues earned during the previous period

add expenses incurred during one period to revenues earned during that same period
Question 21

2.5 / 2.5 pts
Cash received from the issuance of notes payable is a(n) ________ activity on the statement of cash flows.

non-cash investing and financing

operating

investing

financing
Question 22
2.5 / 2.5 pts
Which of the following accounts would be used under the accrual basis of accounting, but not under cash basis accounting?

Cash

Unearned Revenue

Salaries Expense

Service Revenue
Question 23

2.5 / 2.5 pts
The activities that are included in the operating activities section of the statement of cash flows are ________.

activities that create revenue or expenses

activities that increase or decrease long-term assets

activities that pertain to construction of new facilities

activities that involve stockholders’ equity
Question 24

2.5 / 2.5 pts

The financial statements of Denison Furniture Company include the following items:

 ​ 2019 2018 ​ ​ ​ Cash \$53,500 \$53,000 Short-term Investments 29,000 15,000 Net Accounts Receivable 92,000 105,000 Merchandise Inventory 162,000 142,000 Total Assets 532,000 551,000 Total Current Liabilities 235,000 215,000 Long-term Note Payable 62,000 60,000 ​ ​ ​

What is the 2019 cash ratio? (Round your answer to two decimal places)

0.10

0.18

0.35

0.23
Question 25

2.5 / 2.5 pts
Which of the following are NOT included in a post-closing trial balance?

Revenues and expenses

Assets and liabilities

Common Stock and liabilities

Retained Earnings and assets
Question 26

2.5 / 2.5 pts
The ________ section of the statement of cash flows includes increases and decreases in long-term assets.

operating activities

non-cash operating activities

investing activities

financing activities
Question 27

2.5 / 2.5 pts
Oregon Company is preparing its statement of cash flows using the indirect method. During the year, the company purchased equipment for \$15,000 cash. Which of the following statements is true?

\$15,000 would be shown as a negative cash flow in the operating activities section.

\$15,000 would be shown as a positive cash flow in the investing activities section.

\$15,000 would be shown as a positive cash flow in the financing activities section.

\$15,000 would be shown as a negative cash flow in the investing activities section.
Question 28

2.5 / 2.5 pts
Princeton Financial Services, Inc. purchased computers that are to be used in its consulting services. Based on the matching principle, what account, other than Computers, should appear on the balance sheet as of December 31, 2018?
Depreciation Expense – Equipment

Equipment Expense

Service Revenue

Accumulated Depreciation – Equipment
Question 29

2.5 / 2.5 pts
There are three main ways to analyze financial statements. Which of the following does NOT represent one of these ways of analyzing financial statements?

horizontal analysis

financial statement analysis

vertical analysis

ratio analysis

Question 30

2.5 / 2.5 pts
Which of the following sections of the statement of cash flows include activities that create revenue and expenses of the business?

the non-cash investing and financing section

the operating activities section

the financing activities section

the investing activities section
2.5 / 2.5 pts
Which of the following is NOT a way to accurately determine the financial performance of a company?

carefully examining one year of data

comparing a company’s performance with a competing company

comparing a company’s performance with the same industry as a whole

evaluating a company’s performance from year to year
Question 32

2.5 / 2.5 pts
An account that is not closed at the end of the period is called a(n) ________.

expense account

revenue account

permanent account

temporary account

Question 33

2.5 / 2.5 pts
Which of the following sections from the statement of cash flows includes the cash paid for the purchase of Treasury Stock?

the financing activities section

the non-cash investing and financing section

the investing activities section

the operating activities section
Question 34

2.5 / 2.5 pts
Elephant, Inc.’s cost of goods sold for the year is \$2,000,000, and the average merchandise inventory for the year is \$129,000. Calculate the inventory turnover ratio of the company. (Round your answer to two decimal places.)

7.75 times

9.36 times

6.45 times

15.50 times
Inventory turnover ratio = Cost of Goods Sold / Average Merchandise Inventory =
\$2,000,000 / 129,000 = 15.50 times
Question 35

2.5 / 2.5 pts
Which of the following is an example of a period cost for a manufacturing company?

property taxes for the factory

indirect materials

depreciation on factory equipment
Question 36

2.5 / 2.5 pts
Which of the following is a product cost for a manufacturing company?

commissions paid to sales staff

depreciation on corporate building

wages paid to factory janitor
Question 37

2.5 / 2.5 pts
When performing vertical analysis of a balance sheet, the base amount is ________.

total cash and cash equivalents

total assets

gross profit

net income
Question 38

2.5 / 2.5 pts
Which of the following would be considered a product cost for a manufacturing company?

salary of the CEO

salary of the production manager

salaries of the accounting staff

salary of the sales manager
Question 39

2.5 / 2.5 pts
Which of the following is NOT a purpose of using of using ratios to explain different aspects of a company?

evaluating the ability to pay current liabilities

evaluating profitability

evaluating income tax return information

evaluating stock as an investment
Question 40
2.5 / 2.5 pts
The entries that transfer the revenue, expense, and dividends balances to the Retained Earnings account to prepare the company’s books for the next period are called ________ entries.

closing

end of period

opening

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