Accounting for Decision Making Exam Bank
Course Introduction
Accounting for Decision Making introduces students to the fundamental principles and practices of accounting as they relate to effective managerial decision-making. The course explores how financial and non-financial information is used by managers to plan, control, and evaluate business operations. Emphasis is placed on the interpretation and analysis of financial statements, budgeting, performance measurement, and cost behavior. Through case studies and practical exercises, students learn to apply accounting data to real-world business scenarios, enhancing their ability to make informed strategic and operational decisions.
Recommended Textbook
Financial Accounting 9th Edition by Walter T. Harrison
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13 Chapters
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Page 2
Chapter 1: The Financial Statements
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Sample Questions
Q1) On January 1, 2010, total assets for Liftoff Technologies were $125,000; on December 31, 2010, total assets were $145,000. On January 1, 2010, total liabilities were $110,000; on December 31, 2010, total liabilities were $115,000. What is the amount of the change and the direction of the change in Liftoff Technologies' stockholders' equity for 2010?
A) Decrease of $15,000.
B) Increase of $15,000.
C) Increase of $30,000.
D) Decrease of $30,000.
Answer: B
Q2) An evaluation of the income statement can answer the question:
A) What are the main income measures to watch for trends?
B) Does the company have any intangible assets?
C) Does the company have adequate inventory?
D) What has the company decided to do with its excess cash?
Answer: A
Q3) The accounting process begins and ends with people making decisions.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Transaction Analysis
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Sample Questions
Q1) Which of the following is NOT a business transaction?
A) The company sells goods on account.
B) The company buys land for cash.
C) The company is featured in a magazine article.
D) The company sells stock for cash.
Answer: C
Q2) An important rule to remember when analyzing the impact of business transactions on accounts is:
A) net income increases stockholders' equity.
B) if expenses exceed revenues, the company will have a net income.
C) a net loss does not affect stockholders' equity.
D) stockholders' equity includes the two categories of income statement accounts, revenues and liabilities.
Answer: A
Q3) When computing the normal balance of an account:
A) salaries expense should have a credit balance.
B) accounts payable should have a credit balance.
C) equipment can have either a credit or debit balance.
D) notes payable can have either a credit or debit balance.
Answer: B
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Chapter 3: Accrual Accounting Income
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Sample Questions
Q1) The Unearned Rent account has a $6,000 credit balance in the unadjusted trial balance. There is a $1,000 debit adjustment to Unearned Rent. The adjusted trial balance will show Unearned Rent as a:
A) $7,000 debit balance.
B) $7,000 credit balance.
C) $5,000 debit balance.
D) $5,000 credit balance.
Answer: D
Q2) Liquidity measures how quickly an item can be converted into cash.
A)True
B)False
Answer: True
Q3) Rosewood Company had current assets of $582, current liabilities of $433, total assets of $732, and no long-term liabilities. What is Rosewood's debt ratio?
A) 0.59
B) 0.80
C) 1.34
D) 1.95
Answer: A
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Page 5
Chapter 4: Internal Control Cash
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Sample Questions
Q1) Perpetrators of fraud usually commit fraud for their own short-term economic gain.
A)True
B)False
Q2) If a bank statement included a bank collection and related interest revenue, the journal entry to record this reconciling item should include a:
A) debit to Cash.
B) credit to Cash.
C) debit to Note Receivable.
D) debit to Note Payable.
Q3) Aaron's Electronics sells very expensive computer chips. These chips are small, but sell for $5,000 each. Aaron is worried that his employees may be tempted to steal the chips, since they can easily be concealed in their pocket. At any one time, the maximum number of computer chips in inventory is 100. Explain how a point-of-sale terminal can help Aaron with his concern.
Q4) Fraud is a major problem.
A)True
B)False
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6
Chapter 5: Short-Term Investments Receivables
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Sample Questions
Q1) The net realizable value of accounts receivable is the difference between accounts receivable and:
A) sales discounts.
B) allowance for uncollectible accounts.
C) uncollectible-account expense.
D) net revenue.
Q2) Company B receives a note from a customer for a $5,000 sale. On Company B's books:
A) total assets decrease.
B) revenue remains the same.
C) total assets increase.
D) total expenses decrease.
Q3) Under the direct write-off method, uncollectible-account expense is recorded in the same accounting period as the sale.
A)True
B)False
Q4) The principal amount of the note is the amount borrowed by the debtor.
A)True
B)False
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Chapter 6: Inventory Cost of Goods Sold
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Sample Questions
Q1) Company A has inventory at the end of the year with a cost of $75,000. Under the LCM rules, the value of the inventory is $72,600.The journal entry to record the write-down to LCM will:
A) increase cost of goods sold and increase ending inventory.
B) increase cost of goods sold and decrease ending inventory.
C) decrease cost of goods sold and decrease ending inventory.
D) decrease cost of goods sold and increase ending inventory.
Q2) If ending inventory is understated for Year 1, then in Year 2:
A) cost of goods sold and gross profit will both be understated.
B) cost of goods sold and gross profit will both be overstated.
C) cost of goods sold will be overstated and gross profit will be understated.
D) cost of goods sold will be understated and gross profit will be overstated.
Q3) If prices are rising and a company is using LIFO, large purchases of inventory near the end of the year will:
A) increase income taxes paid.
B) decrease income taxes paid.
C) not change the amount of income taxes paid.
D) cannot be determined.
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8
Chapter 7: Plant Assets, Natural Resources, Intangibles
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Sample Questions
Q1) Costs that do not extend the asset's capacity or its useful life, but merely maintain the asset or restore it to working order are recorded as:
A) capital expenditures.
B) expenses.
C) additions.
D) improvements.
Q2) Wacky Motors purchased a machine that will help diagnose problems with engines. The machine cost $300,000 on January 3, 2012 and had a residual value of $20,000, with a useful life of 7 years. Calculate the depreciation expense and book value as of December 31, 2012 under both the straight-line and DDB methods.
Q3) On January 2, 2011, KJ Corporation acquired equipment for $260,000. The estimated life of the equipment is 5 years or 40,000 hours. The estimated residual value is $20,000.
What is the book value of the asset on December 31, 2012, if KJ Corporation uses the straight-line method of depreciation?
A) $80,000
B) $96,000
C) $104,000
D) $164,000
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Chapter 8: Long-Term Investments the Time Value of Money
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Sample Questions
Q1) When a U.S. Company owns a foreign company, a foreign-currency translation adjustment is made before consolidation entries are prepared.
A)True
B)False
Q2) When a company owns more than 50% of the common stock of another company: A) substantial financial statements are prepared. B) consolidated financial statements are prepared. C) controlling financial statements are prepared. D) minority financial statements are prepared.
Q3) Unrealized Gain/Loss on investments account appears under other comprehensive income on a separate section of the income statement.
A)True
B)False
Q4) Market prices of bonds have no correlation to market interest rate. A)True
B)False
Q5) On the balance sheet, Interest Receivable is reported as a fixed asset.
A)True B)False
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Chapter 9: Liabilities
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Sample Questions
Q1) The current ratio is current assets:
A) minus current liabilities.
B) divided by current liabilities.
C) plus current liabilities.
D) multiplied by current liabilities.
Q2) The carrying value of bonds decreases each interest period if the bonds were issued at a discount.
A)True
B)False
Q3) All of the following are advantages of issuing stock EXCEPT that it:
A) creates no interest expense which must be paid.
B) is less risky to the issuing corporation.
C) creates no liabilities for the corporation.
D) generally results in a higher earnings per share.
Q4) Bonds in a particular issue which mature in installments over a period of time are called:
A) convertible bonds.
B) term bonds.
C) callable bonds.
D) serial bonds.
Page 11
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) Common stockholders receive dividends even if the total dividend is not large enough to pay the preferred stockholders first.
A)True
B)False
Q2) Preferred stock that requires the company to redeem the stock at a set price is called:
A) preferred stock.
B) convertible preferred stock.
C) redeemable preferred stock.
D) callable preferred stock.
Q3) Another name for paid-in capital in excess of par is additional common stock.
A)True
B)False
Q4) Wilson Corporation had the following transactions:
1. Issued 7,000 shares of common stock with a stated value of $15 for $155,000.
2. Issued 3,000 shares of $100 par value preferred stock at $117 for cash.
Required: Prepare the journal entries for the above transactions.
Q5) Treasury stock is a contra-stockholders' equity account.
A)True
B)False
12
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Chapter
Income, the Statement of Stockholders Equity
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Sample Questions
Q1) The net of foreign-currency transaction gains and losses will appear on the balance sheet.
A)True
B)False
Q2) The amount of a company's net income per share of its outstanding common stock is:
A) net income per share.
B) gross profit per share.
C) earnings per share.
D) taxable income per share.
Q3) Publicly traded companies have to file their financial statements with the IRS.
A)True
B)False
Q4) Prior-period adjustments appear on the statement of retained earnings.
A)True
B)False
Page 13
Q5) Financial statement fraud does not include the improper recognition of expenses.
A)True
B)False
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Page 14
Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) Plymouth Corporation reported a decrease in inventory of $15,000. The cost of goods sold for the year was $180,000. There was also a $5,000 decrease in accounts payable from the beginning of the year to the end of the year. What were Plymouth's cash payments to suppliers?
A) $202,000
B) $188,000
C) $172,000
D) $158,000
Q2) Financing activities involve:
A) issuing debt.
B) acquiring long-term assets.
C) lending money.
D) acquiring investments.
Q3) Cash received from the issuance of bonds would be reported on a statement of cash flows under:
A) investing activities.
B) financing activities
C) operating activities.
D) noncash activities.
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Page 15
Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Economic value added (EVA) can be computed as net income minus interest expense minus capital charge.
A)True
B)False
Q2) On a statement of cash flows, which is NOT considered a financing activity?
A) Deferred income tax
B) Proceeds from long-term debt
C) Repayment of long-term debt
D) Foreign currency effect on cash
Q3) The primary focus of horizontal analysis is:
A) percentage changes in comparative financial statements.
B) the balance sheet only.
C) the changes in individual financial statement amounts as a percentage of some related total.
D) the change in key financial statement ratios over a certain time frame.
Q4) On a statement of cash flows, which is considered an investing activity?
A) Depreciation
B) Increase in inventory
C) Sale of securities
D) Repayment of debt
Page 16
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