Accounting for Decision Making Exam Bank
Course Introduction
Accounting for Decision Making explores the use of accounting information as a critical tool for effective business planning, control, and decision-making. The course covers fundamental principles of both financial and managerial accounting, emphasizing the interpretation and application of financial statements, cost analysis, budgeting, and performance evaluation. Students will develop the analytical skills necessary to assess financial data, support strategic decisions, and contribute to value creation within organizations. Through case studies and practical exercises, learners gain an understanding of how accounting information guides managers in making informed business choices aligned with organizational goals.
Recommended Textbook
Horngren's Accounting 8th Australia Edition by Tracie Nobles
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Page 2
Chapter 1: The Role of Accounting in Decision Making
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Q1) The Australian conceptual framework encompasses non-profit organisations as well as for-profit ones.
A)True
B)False
Answer: True
Q2) The balance sheet of a business represents the account balances as at a particular date in time.
A)True
B)False
Answer: True
Q3) The business receives cash from a customer that is owed to the company 'on account',based on services rendered to the customer previously.How does the collection of the cash affect the accounting equation?
A) One asset increases; one asset decreases.
B) Assets increase; owners' equity increases.
C) Assets increase; liabilities increase.
D) Assets decrease; owners' equity decreases.
Answer: A
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Chapter 2: Recording Business Transactions
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Q1) A trial balance is the list of all of a company's accounts along with their account numbers.
A)True
B)False
Answer: False
Q2) A business renders services for $16 000 and collects cash from the customer.Which account is debited?
A) Service revenue
B) Cash
C) Accounts payable
D) Accounts receivable
Answer: B
Q3) A business pays $500 cash for supplies.Which account is credited?
A) Service revenue
B) Accounts payable
C) Cash
D) Supplies
Answer: C
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Chapter 3: The Adjusting Process
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Q1) Smith Technical Services is working on a six-month job for a client,starting on 1 February.They will collect $20,000 from their customer when the job is finished.On 1 March,their Accounts receivable account had a debit balance of $4000.At the end of March,after monthly adjusting entries have been made,what will be the balance in Accounts receivable?
A) Debit balance of $3333
B) Debit balance of $7333
C) Credit balance of $16,667
D) Debit balance of $20,000
Answer: B
Q2) ABC Company signed a one-year $48,000 loan payable at 8% interest on 1 May 2017.If ABC only adjusts their accounts once a year at year-end,how much interest expense was accrued on 31 December 2017?
A) $3840
B) $1280
C) $2560
D) $3200
Answer: C
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Chapter 4: Completing the Accounting Cycle
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Q1) Which of the following accounts will be closed by debiting the Income summary account?
A) Salary expense
B) Accounts receivable
C) Service revenue
D) Drawings
Q2) The current ratio is a measure of a company's:
A) leverage.
B) solvency.
C) profitability.
D) liquidity.
Q3) Rose Company earned revenues of $17,000 and incurred expenses of $4500.The drawings of Mary Rose,the owner,were $1000.What is the balance in the Income summary account prior to closing profit or loss to the Rose,capital account?
A) Debit balance of $17,000
B) Credit balance of $12,500
C) Credit balance of $17,000
D) Debit balance of $12,500
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6
Chapter 5: Retailing Operations
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Q1) If a firm uses the periodic inventory method,which of the following is subtracted from Purchases to arrive at Net purchases?
A) Cost of goods available for sale
B) Ending inventory
C) Purchase discounts and Purchase returns and allowances
D) Beginning inventory
Q2) A company using the perpetual inventory system purchased inventory worth $24,000 on credit with terms of 2/10,n/30.Defective inventory of $2000 was returned 2 days later and the accounts were appropriately adjusted.If the invoice is paid within 10 days,the amount of the purchase discount that would be available to the company is:
A) $480
B) $520
C) $470
D) $440
Q3) On a retailer's balance sheet,inventory is listed as a(n):
A) revenue.
B) expense.
C) current asset.
D) current liability.
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Page 7
Chapter 6: Retail Inventory
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Q1) Harris Company had the following balances and transactions during 2016: \[\begin{array} { | l | l | }
\hline \text { Beginning inventory } & 280 \text { units at } \$ 72 \\
\hline 10 \text { March } & \text { Sold } 70 \text { units } \\
\hline 10 \text { June } & \text { Purchased } 150 \text { units at } \$ 76 \\
\hline 30 \text { October } & \text { Sold } 125 \text { units } \\
\hline
\end{array}\]
What would the cost of sales be as reported on the income statement for the year ending 31 December 2016 if the perpetual,last-in,first-out costing method is used?
A) $5040
B) $15,840
C) $16,440
D) $11,400
Q2) Under last-in,first-out,the cost of sales is based on the oldest purchases.
A)True
B)False
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Chapter 7: Accounting Information Systems
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Sample Questions
Q1) A cash receipts journal could contain all of the following columns except:
A) sales revenue.
B) purchases.
C) accounts receivable.
D) cash.
Q2) Assuming the use of special journals,the purchase of inventory from Landin Browning for cash would be recorded in the:
A) cash receipts journal.
B) general journal.
C) cash payments journal.
D) purchases journal.
Q3) ERP systems are used by some large organisations.ERP stands for:
A) Early Reporting Process.
B) Expense and Revenue Program.
C) Enterprise Resource Planning.
D) Enterprise Record Package.
Q4) If special journals are used,the purchase of inventory for cash would be recorded in the cash payments journal.
A)True
B)False
Page 9
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Chapter 8: Internal Control and Cash
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Q1) Which of the following describes the internal control component monitoring of controls?
A) Monitoring of controls is designed to ensure that the business's goals are achieved.
B) Monitoring of controls is the 'tone at the top' of the business.
C) A company must identify its risks.
D) Internal auditors monitor company controls to safeguard assets and external auditors evaluate the controls to ensure that the accounting records are accurate.
Q2) Internal auditors evaluate company controls to ensure the accuracy of financial statements.
A)True
B)False
Q3) The voucher system improves internal control by requiring all expenditures to be approved before payment can be made.
A)True
B)False
Q4) Mandatory vacations and job rotation improve internal control.
A)True
B)False
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Chapter 9: Receivables
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Q1) Which of the following is NOT a key issue in controlling and managing receivables?
A) Extend credit only to customers who are most likely to pay.
B) Separate the responsibility for custody and protection of inventory assets from the accounting for inventory assets.
C) Separate cash-handling, credit and accounting duties to keep employees from stealing cash collected from customers.
D) Pursue collection from customers to maximise cash flow.
Q2) A company has net credit sales of $1,200,000,beginning net accounts receivable of $260,000 and ending net accounts receivable of $203,000.What is the days' sales in receivables? Use a 365-day year.(Round to the nearest day.)
A) 62 days
B) 79 days
C) 70 days
D) 141 days
Q3) The two major types of receivables are accounts receivable and bills receivable.
A)True
B)False
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Chapter 10: Non-Current Assets: Property, plant and Equipment, and Intangibles
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Q1) Iverycoast Ltd purchased a van on 1 January 2016 for $840,000.Estimated life of the van was five years,and its estimated residual value was $91,000.Iverycoast uses the straight-line method of depreciation.At the beginning of 2018,the company revised the total estimated life of the asset from five years to six years.The estimated residual value remained the same as estimated earlier.Calculate the depreciation expense for the year 2018.
A) $112,350
B) $152,250
C) $115,500
D) $149,800
Q2) Tangible assets are assets with no physical form that have value because of the special rights they carry.
A)True
B)False
Q3) Plant and equipment are more likely to decrease in value than increase.
A)True
B)False
Q4) Goodwill is NOT amortised-but evaluated-each year for a decline in value.
A)True
B)False
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Chapter 11: Current Liabilities and Payroll
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Q1) Bike World offers warranties on all their bikes.They estimate warranty expense at 5.5% of sales.At the beginning of 2016,the Estimated warranty payable account had a credit balance of $2000.During the year,Bike World had $296,000 of sales,and had to pay out $5400 in warranty payments.How much Warranty expense will be reported on the 2016 income statement?
A) $7400
B) $14,280
C) $12,880
D) $16,280
Q2) Which of the following is included in the entry to record the employer's payroll taxes?
A) A debit to Payroll tax payable
B) A credit to Payroll tax payable
C) A credit to Income tax payable
D) A credit to Payroll tax expense
Q3) Gross pay is the total amount of compensation earned by an employee,before any deductions are made.
A)True
B)False
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Chapter 12: Non-Current Liabilities,debentures Payable and
Classification of Liabilities on the Balance Sheet
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Q1) On 1 December 2016,Fine Products borrowed $96,000 on a 8%,8-year note with annual instalment payments of $12,000.00 plus interest due on 1 December of each succeeding year.On 1 December,the principal amount was initially recorded as Long-term notes payable.What amount of the note payable will be shown as current portion of Long-term notes payable on the balance sheet as of 31 December 2016?
A) $12,000.00
B) $7680.00
C) $24,000.00
D) $19,680.00
Q2) On 1 January 2017,Bratios Company purchases equipment and signs a 6-year mortgage payable for $110,000 at 15%.The mortgage will be paid in equal annual instalments of $29,066,beginning 1 January 2018.Calculate the balance of the Mortgage payable account after the payment of the first instalment.
A) $16,500
B) $82,983
C) $80,934
D) $97,434
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Page 14
Chapter 13: Partnerships
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Q1) Keith and Jim are partners.Keith has a capital balance of $51,000 and Jim has a capital balance of $37,000.Bill invested $27,000 to acquire an ownership interest of 30%.Which of the following statements is true of this transaction?
A) Keith and Jim received a bonus of $2550 each.
B) Keith and Jim received a bonus of $3750 each.
C) Bill received a bonus of $5100.
D) Bill received a bonus of $7500.
Q2) Steve owns 62% and Mark owns 38% of a partnership business.For developing the business,they purchased equipment for $10,300.The current market value of the equipment at the time of purchase was $9800.At the time of the balance sheet preparation,depreciation of $220 was incurred.Based on the information provided,which of the following is true of the partnership balance sheet?
A) The Equipment account will be debited at $9800 on the date of purchase.
B) The Equipment account will be debited at $9580 on the date of purchase.
C) The Equipment account will be debited at $10,080 on the date of purchase.
D) The Equipment account will be debited at $10,300 on the date of purchase.
Q3) Partnerships always share profit equally among all partners.
A)True
B)False
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Page 15
Chapter 14: Companies: Formation and Shareholders
Equity
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Q1) Which of the following is the price for which a person can buy or sell a share of shares?
A) Market value
B) Amortised value
C) Book value
D) Liquidation value
Q2) Deferred tax can either be an asset or a liability.
A)True
B)False
Q3) A company declares a dividend of $0.75 per share on 11,000 ordinary shares.Which of the following would be included in the entry to record the declaration?
A) Dividends payable, ordinary would be debited for $8250
B) Ordinary share capital would be credited for $8250
C) Retained earnings would be credited for $8250
D) Retained earnings would be debited for $8250
Q4) If preference shares are non-cumulative,then the company does NOT need to pay dividends that were passed in previous years.
A)True
B)False
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Chapter 15: Companies: Capital Management and the Income Statement
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Q1) Which of the following is a TRUE statement?
A) Both a share split and a share dividend will decrease total assets.
B) Neither a share split nor a share dividend will affect total assets or total liabilities.
C) Both a share split and a share dividend will increase total liabilities.
D) A share split will increase total assets but a share dividend will not.
Q2) Which of the following statements is TRUE?
A) Both a share dividend and a share split reduce retained earnings.
B) Neither a share dividend nor a share split will result in net gains or losses.
C) Both a share dividend and a share split increase the balance in the ordinary share account.
D) A share split increases the market value of the share.
Q3) Which of the following will decrease the balance in Retained earnings?
A) Share issue
B) Purchase of non-current assets
C) Share split
D) Cash dividend
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Chapter 16: The Cash Flow Statement
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Q1) Which of the following sections from the cash flow statement would include the acquisition of a building by issuing ordinary shares?
A) The investing section
B) The non-cash investing and financing section
C) The financing section
D) The operating section
Q2) Which of the following sections from the cash flow statement includes purchases and sales of non-current assets?
A) The investing section
B) The financing section
C) The operating section
D) The non-cash investing and financing section
Q3) Most public companies use the direct method to prepare their cash flow statement because the calculations are simpler.
A)True
B)False
Q4) Issuing preference shares to shareholders would be a financing activity.
A)True
B)False
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Chapter 17: The Framework of Accounting
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Q1) Since 2005,the main influence on Australian accounting standards is:
A) U.S. accounting standards.
B) British accounting standards.
C) International accounting standards.
D) All of the above
Q2) The total contract price to build an office building is $4 200 000,with estimated costs of $2 800 000.The construction firm's costs for Year 1 were $800 000.Under the percentage of completion method,gross profit reported in Year 1 is:
A) $2 200 000.
B) $1 200 000.
C) $400 000.
D) none of the above
Q3) A specific exception to the use of historical cost to value assets is if the net realisable value of inventories falls below cost.In this case,the justification for the use of market value rather than cost relies on the:
A) comparability principle.
B) cost versus benefit principle.
C) materiality principle.
D) conservatism principle.
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Page 19
Chapter 18: Financial Statement Analysis
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Q1) When comparing two companies,what kind of information does a company's rate of return on total assets provide?
A) How effectively each company uses leverage to finance its business
B) How much profit each company generates with each dollar of sales
C) How effectively a company collects cash on credit sales
D) How effectively each company uses assets to generate profits
Q2) In a vertical analysis of the income statement,each line item is shown as a percentage of profit.
A)True
B)False
Q3) Which of the following is one of the non-financial elements of a company annual report:
A) Statement of changes in equity
B) Chairman's report
C) Balance sheet
D) Income statement
Q4) Vertical analysis is used with the income statement,but not with the balance sheet.
A)True
B)False
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Chapter 19: Introduction to Managerial Accounting and the Master Budget
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Q1) Evanston Manufacturing Company reported the following information for the year 2017:
\[\begin{array} { | l | l | }
\hline \text { Number of units produced } & 6000 \\
\hline \text { Number of units sold } & 6200 \\
\hline \text { Cost of goods manufactured } & \$ 402,000 \\
\hline \text { Cost of sales } & \$ 525,500 \\
\hline \text { Sales revenue } & \$ 1,360,000 \\
\hline \text { Gross profit } & \$ 742,000 \\
\hline \text { Operating expense } & \$ 728,000 \\
\hline
\end{array}\]
What was the unit product cost?
A) $64.84
B) $67.00
C) $226.67
D) $84.76
Q2) Factory rent,taxes and insurance are included in manufacturing overhead. A)True B)False
Page 21
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Chapter 20: Job Costing
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Q1) Dexter Accounting expects its accountants to work a total of 46,000 direct labour hours per year.Dexter's estimated total indirect costs are $598,000.Direct labour hours is the allocation base for indirect costs.What is the indirect cost allocation rate?
A) $13 per hour
B) $170 per hour
C) $130 per hour
D) $26 per hour
Q2) The entry to record the purchase of materials on account using a job order costing system would include a:
A) debit to Work in process inventory.
B) debit to Materials inventory.
C) credit to Materials inventory.
D) debit to Accounts payable.
Q3) In the service industry,the use of job order costing is made much more effective if a company uses automated time records.
A)True
B)False
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Chapter 21: Cost-Volume-Profit Analysis
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Q1) Margaret sells hand-knit scarves at a flea market.Each scarf sells for $35.Margaret pays $60 to rent a vending space for one day.The variable costs are $20 per scarf.How many scarves should she sell each day in order to break even?
A) 4 scarves
B) 35 scarves
C) 7 scarves
D) 3 scarves
Q2) Browning Company sells two products-X and Y.Product X is sold for $29 per unit and has a variable cost per unit of $15.Product Y is sold for $32 per unit and has a unit variable cost of $21.Total fixed costs for the company are $20,000.Browning Company typically sells three units of Product X for every unit of Product Y.What is the breakeven point in total units?
A) 754 units
B) 1509 units
C) 377 units
D) 1131 units
Q3) The mixed cost per unit is constant throughout the relevant range of activity.
A)True
B)False
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Chapter 22: Short-Term Business Decisions
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Q1) Which of the following business strategies would NOT be consistent with a price setter?
A) Exploit the value of a fashionable brand name
B) Enter a competitive market and focus on cost cutting
C) Produce a unique product
D) Differentiate the product clearly from the competitors
Q2) When a company is considering the option of processing their product further to achieve higher sales revenues,they must consider all of the following factors EXCEPT:
A) how much incremental revenue can be earned if processed further?
B) how much cost is required to produce the basic product, before processing further?
C) will the additional processing produce any environmental toxins?
D) how much additional costs are necessary to process further?
Q3) Fixed costs that do NOT differ between two alternatives are:
A) considered opportunity costs.
B) irrelevant to the decision.
C) important only if they represent a material dollar amount.
D) relevant to the decision.
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Chapter 23: Capital Investment Decisions and the Time
Value of Money
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Q1) Lara is going to receive $10,000 a year at the end of each of the next five years from her insurer to meet her education cost.Using a discount rate of 14%,the present value of the receipts can be stated as:
A) PV = $10,000 (PV factor, i = 14%, n = 5).
B) PV = $10,000 (Annuity FV factor, i = 14%, n = 5).
C) PV = $10,000 (FV factor, i = 14%, n = 5).
D) PV = $10,000 (Annuity PV factor, i = 14%, n = 5).
Q2) Software Hub is deciding whether to purchase new accounting software.The cost of the software package is $56,000 and its expected life is 10 years.The payback for this investment is four years.Assuming equal yearly cash flows,what are the expected annual net cash savings from the new software? (Assume the investment has zero salvage value.)
A) $14,000
B) $38,483
C) $5600
D) $224,000
Q3) The payback method uses discounted cash flows to make investment decisions.
A)True
B)False
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