SOLUTIONS MANUAL
MANAGERIAL ACCOUNTING: TOOLS FOR BUSINESS DECISION-
MAKING
6TH CANADIAN EDITION
CHAPTER NO. 1: MANAGERIAL ACCOUNTING
SOLUTIONS TO DO IT! REVIEW
DO IT! REVIEW 1.1
1. False. Preparation of budgets is part of managerial accounting.
2. False. Financial accounting reports pertain to the entity as a whole and are
highly aggregated. It is managerial accounting reports that pertain to
subunits of the business and are very detailed.
3. False. Financial accounting must adhere to generally accepted accounting
principles and are subject to an audit by chartered professional
accountants.
4. True.
5. True.
6. True.
LO 1,2,3 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
DO IT! REVIEW 1.2
1. f. Just-in-time (JIT) inventory
2. a. Activity-based costing (ABC)
3. c. Total quality management (TQM)
4. d. Research and development, and product design
5. e. Service industries
6. b. Balanced scorecard
LO 4 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
,SOLUTIONS TO EXERCISES
EXERCISE 1.3
Financial Accounting Managerial Accounting
Primary users External users Internal users
Types of reports Financial statements Internal reports
Frequency of reports Quarterly and annually As frequently as needed
Purpose of reports General-purpose Special-purpose for
specific decisions
Content of reports Highly aggregated Very detailed
Generally accepted Relevance to decisions
accounting principles
Verification Annual audit by CPA No independent audits
(chartered professional
accountant)
LO 1 BT: C Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
EXERCISE 1.4
1. F 6. M
2. M 7. F
3. F 8. F
4. M 9. M
5. F 10. F
LO 1 BT: C Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
EXERCISE 1.5
,1.False. Financial accounting focuses on providing information to external users.
2.True.
3.False. Preparation of budgets is part of managerial accounting.
4.False. Managerial accounting applies to service, merchandising, and
manufacturing companies.
5.True.
6.False. Managerial accounting reports are prepared as frequently as needed.
7.True.
8.True.
9.False. Financial accounting reports must comply with generally accepted
accounting principles.
10.False. Managerial accountants are expected to behave ethically, and there is a
code of ethical standards for managerial accountants.
LO 1 BT: K Difficulty: S Time: 10 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
EXERCISE 1.6
a. (1)Planning
b. (2)Directing
c. (3)Controlling
LO 2 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
EXERCISE 1.7
a. (6) Chief executive officer
b. (5) Line position
c. (2) Chief financial officer
d. (1) Board of directors
e. (7) Staff position
f. (4) Controller
g. (3) Treasurer
LO 2 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
, EXERCISE 1.8
Following the implementation of the Sarbanes-Oxley Act, CEOs and CFOs
must certify that the financial statements give a fair presentation of the
company’s operating results and its financial condition. In addition, top
managers must certify that the company maintains an adequate system of
internal controls to safeguard the company’s assets and ensure accurate
financial reports. Companies must pay more attention to the composition of
the board of directors. In particular, members of the audit committee of the
board of directors must all be entirely independent (that is, non-employees)
and at least one must be a financial expert. The Sarbanes-Oxley Act increases
the penalties for misconduct.
LO 3 BT: C Difficulty: M Time: 5 min. AACSB: Ethics CPA: cpa-t003 cpa-e001 CM: Mgt. Accounting; Ethics
EXERCISE 1.9
a. 3. Balanced scorecard
b. 4. Value chain
c. 2. Just-in-time inventory
d. 1. Activity-based costing
LO 4 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
SOLUTIONS TO CASES
CASE 1.10
Since the questions were fairly open-ended, the following are only suggested results.
The class may be able to think of others, or of more items for each one.
a. Hayley Geagea Needs information on sales, perhaps by salesperson and by
territory
Luc Lemieux Needs cost information for his department
Gary Richardson Needs all accounting information
Manny Cordoza Needs product cost information
Patrick Dumoulin Needs information on component costs and costs for his
department
MANAGERIAL ACCOUNTING: TOOLS FOR BUSINESS DECISION-
MAKING
6TH CANADIAN EDITION
CHAPTER NO. 1: MANAGERIAL ACCOUNTING
SOLUTIONS TO DO IT! REVIEW
DO IT! REVIEW 1.1
1. False. Preparation of budgets is part of managerial accounting.
2. False. Financial accounting reports pertain to the entity as a whole and are
highly aggregated. It is managerial accounting reports that pertain to
subunits of the business and are very detailed.
3. False. Financial accounting must adhere to generally accepted accounting
principles and are subject to an audit by chartered professional
accountants.
4. True.
5. True.
6. True.
LO 1,2,3 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
DO IT! REVIEW 1.2
1. f. Just-in-time (JIT) inventory
2. a. Activity-based costing (ABC)
3. c. Total quality management (TQM)
4. d. Research and development, and product design
5. e. Service industries
6. b. Balanced scorecard
LO 4 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
,SOLUTIONS TO EXERCISES
EXERCISE 1.3
Financial Accounting Managerial Accounting
Primary users External users Internal users
Types of reports Financial statements Internal reports
Frequency of reports Quarterly and annually As frequently as needed
Purpose of reports General-purpose Special-purpose for
specific decisions
Content of reports Highly aggregated Very detailed
Generally accepted Relevance to decisions
accounting principles
Verification Annual audit by CPA No independent audits
(chartered professional
accountant)
LO 1 BT: C Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
EXERCISE 1.4
1. F 6. M
2. M 7. F
3. F 8. F
4. M 9. M
5. F 10. F
LO 1 BT: C Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
EXERCISE 1.5
,1.False. Financial accounting focuses on providing information to external users.
2.True.
3.False. Preparation of budgets is part of managerial accounting.
4.False. Managerial accounting applies to service, merchandising, and
manufacturing companies.
5.True.
6.False. Managerial accounting reports are prepared as frequently as needed.
7.True.
8.True.
9.False. Financial accounting reports must comply with generally accepted
accounting principles.
10.False. Managerial accountants are expected to behave ethically, and there is a
code of ethical standards for managerial accountants.
LO 1 BT: K Difficulty: S Time: 10 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
EXERCISE 1.6
a. (1)Planning
b. (2)Directing
c. (3)Controlling
LO 2 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
EXERCISE 1.7
a. (6) Chief executive officer
b. (5) Line position
c. (2) Chief financial officer
d. (1) Board of directors
e. (7) Staff position
f. (4) Controller
g. (3) Treasurer
LO 2 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
, EXERCISE 1.8
Following the implementation of the Sarbanes-Oxley Act, CEOs and CFOs
must certify that the financial statements give a fair presentation of the
company’s operating results and its financial condition. In addition, top
managers must certify that the company maintains an adequate system of
internal controls to safeguard the company’s assets and ensure accurate
financial reports. Companies must pay more attention to the composition of
the board of directors. In particular, members of the audit committee of the
board of directors must all be entirely independent (that is, non-employees)
and at least one must be a financial expert. The Sarbanes-Oxley Act increases
the penalties for misconduct.
LO 3 BT: C Difficulty: M Time: 5 min. AACSB: Ethics CPA: cpa-t003 cpa-e001 CM: Mgt. Accounting; Ethics
EXERCISE 1.9
a. 3. Balanced scorecard
b. 4. Value chain
c. 2. Just-in-time inventory
d. 1. Activity-based costing
LO 4 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa-t003 CM: Mgt. Accounting
SOLUTIONS TO CASES
CASE 1.10
Since the questions were fairly open-ended, the following are only suggested results.
The class may be able to think of others, or of more items for each one.
a. Hayley Geagea Needs information on sales, perhaps by salesperson and by
territory
Luc Lemieux Needs cost information for his department
Gary Richardson Needs all accounting information
Manny Cordoza Needs product cost information
Patrick Dumoulin Needs information on component costs and costs for his
department
