Accounting for Decision Making Exam Review
Course Introduction
Accounting for Decision Making is designed to introduce students to the principles and practices of accounting with a focus on its role in managerial decision-making. The course covers essential topics such as financial statement analysis, budgeting, cost-volume-profit analysis, and performance measurement. Students will learn how to use accounting information to make well-informed business decisions, evaluate organizational performance, and plan for the future. Real-world cases and practical exercises are used to help students develop analytical skills and apply accounting concepts to a variety of business scenarios.
Recommended Textbook
Financial Managerial Accounting 14th Edition by Carl Warren
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Page 2
Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) Donner Company is selling a piece of land adjacent to its business.An appraisal reported the market value of the land to be $120,000.The Focus Company initially offered to buy the land for $107,000.The companies settled on a purchase price of $115,000.On the same day,another piece of land on the same block sold for $122,000.Under the cost principle,what is the amount that will be used to record this transaction in the accounting records?
Answer: $115,000
Q2) Some of the major fraudulent acts by senior executives started as what they considered to be small ethical lapses which grew out of control.
A)True
B)False
Answer: True
Q3) Which of the following would not normally operate as a service business?
A) pet groomer
B) grocer
C) lawn care company
D) styling salon
Answer: B
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3
Chapter 2: Analyzing Transactions
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Sample Questions
Q1) Which of the following entries records the collection of cash from cash customers?
A) Fees Earned,debit; Cash,credit
B) Fees Earned,debit; Accounts Receivable,credit
C) Cash,debit; Fees Earned,credit
D) Accounts Receivable,debit; Fees Earned,credit
Answer: C
Q2) The payment for the monthly rent will require which of the following entries?
A) debit Cash and debit Rent Expense
B) credit Cash and credit Rent Expense
C) debit Rent Expense and credit Cash
D) credit Rent Expense and debit Cash
Answer: C
Q3) Liabilities are debts owed by the business entity.
A)True
B)False
Answer: True
Q4) Prepare a journal entry on October 12 for the fees earned on account,$14,600.Omit explanation.
Answer: 11ea8952_b5b6_5382_861b_85defbc65d86_TB6238_00
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Chapter 3: The Adjusting Process
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Q1) The balance in the accumulated depreciation account is the sum of the depreciation expense recorded in past periods.
A)True
B)False
Answer: True
Q2) All of the following statements regarding vertical analysis are true except A) vertical analysis may be prepared for several periods to analyze changes in relationships over time
B) in a vertical analysis of a balance sheet,each asset item is stated as a percent of total assets
C) in a vertical analysis of an income statement,each item is stated as a percent of total expenses
D) major differences between a company's vertical analysis and industry averages should be investigated
Answer: C
Q3) Generally accepted accounting principles require accrual-basis accounting. A)True
B)False
Answer: True
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Page 5
Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Determine the total assets.
A) $25,130
B) $16,830
C) $22,930
D) $24,030
Q2) A net loss appears on the end-of-period spreadsheet in the
A) debit column of the Balance Sheet columns
B) credit column of the Balance Sheet columns
C) debit column of the Income Statement columns
D) credit column of the Adjustments columns
Q3) Once the adjusted trial balance is in balance,the flow of accounts will now go into the financial statements.
A)True
B)False
Q4) The accounting cycle requires three trial balances be done.In what order should they be prepared?
A) post-closing,unadjusted,adjusted
B) unadjusted,post-closing,adjusted
C) unadjusted,adjusted,post-closing
D) post-closing,adjusted,unadjusted
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Chapter 5: Accounting for Merchandising Businesses
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Sample Questions
Q1) Generally,the revenue account for a merchandising business is entitled
A) Sales
B) Fees Earned
C) Gross Sales
D) Gross Profit
Q2) Most retailers record all credit card sales as credit sales.
A)True
B)False
Q3) If the buyer bears the freight costs related to a purchase,the terms are said to be FOB destination.
A)True
B)False
Q4) Cost of goods sold is often the largest expense on a merchandising company income statement.
A)True
B)False
Q5) The seller may prepay the freight costs even though the terms are FOB shipping point.
A)True
B)False
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Chapter 6: Inventories
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Sample Questions
Q1) Which of the following will be the same amount regardless of the cost flow assumption adopted?
A) number of items ordered
B) gross profit
C) cost of goods sold
D) ending inventory
Q2) Under the periodic inventory system,a physical inventory is taken to determine the cost of the inventory on hand and the cost of the goods sold.
A)True
B)False
Q3) What is the amount of the inventory at the end of the year using the FIFO method?
A) $1,685
B) $1,575
C) $1,805
D) $3,585
Q4) Unsold consigned merchandise should be included in the consignee's inventory.
A)True
B)False
Q5) Average cost periodic (round average to nearest cent)
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Chapter 7: Internal Control and Cash
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Sample Questions
Q1) A voucher is usually supported by
A) a supplier's invoice
B) a purchase order
C) a receiving report
D) all of these
Q2) In establishing a petty cash fund,a check is written for the amount of the fund and is recorded as a debit to Accounts Payable and a credit to Petty Cash.
A)True
B)False
Q3) A $200 petty cash fund has cash of $20 and receipts of $177.The journal entry to replenish the account would include a credit to
A) Cash for $20
B) Cash Short and Over for $3
C) Petty Cash for $190
D) Cash for $180
Q4) Cash equivalents include short-term investments that will be converted to cash within 120 days.
A)True
B)False
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Chapter 8: Receivables
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Sample Questions
Q1) The journal entry to record a note received from a customer to replace an account is
A) debit Notes Receivable; credit Accounts Receivable
B) debit Accounts Receivable; credit Notes Receivable
C) debit Cash; credit Notes Receivable
D) debit Notes Receivable; credit Notes Payable
Q2) Other than Accounts Receivable and Notes Receivable,name other receivables that might be included in the general ledger.
Q3) The balance in Allowance for Doubtful Accounts will directly impact the end-of-period adjustment for the bad debt expense when using which of the following methods?
A) allowance method based on aging the receivables
B) direct write-off method
C) accrual method
D) declining value method
Q4) The amount for which a promissory note is written is called the A) realizable value
B) maturity value
C) face value
D) proceeds
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Chapter 9: Long-Term Assets: Fixed and Intangible
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Q1) On December 31,Strike Company sold one of its batting cages for $20,000.The equipment had an initial cost of $310,000 and had accumulated depreciation of $260,000.Depreciation has been recorded up to the end of the year.What is the amount of the gain or loss on this transaction?
A) gain of $20,000
B) gain of $30,000
C) loss of $20,000
D) loss of $30,000
Q2) The cost of repairing damage to a machine during installation is debited to a fixed asset account.
A)True
B)False
Q3) An exchange is said to have commercial substance if future cash flows remain the same as a result of the exchange.
A)True
B)False
Q4) An intangible asset is one that has a physical existence.
A)True
B)False
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Chapter 10: Liabilities: Current,installment Notes,and
Contingencies
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Sample Questions
Q1) An interest-bearing note is a loan in which the lender deducts interest from the amount loaned before the money is advanced to the borrower.
A)True
B)False
Q2) Form W-4 is a form authorizing employers to withhold a portion of employee earnings for payment of an employee's federal income taxes.
A)True
B)False
Q3) Estimating and recording product warranty expense in the period of the sale best follows the
A) cost concept
B) business entity concept
C) matching concept
D) materiality concept
Q4) List five internal controls that relate directly to payroll.
Q5) The payroll summary for December 31 for Waters Co.revealed total earnings of $80,000.All earnings are subject to social security tax of 6.0% and Medicare tax of 1.5%.Journalize the entry to record the accrual of employer payroll taxes.
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Chapter 11: Liabilities: Bonds Payable
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Sample Questions
Q1) On January 1,the Elias Corporation issued 10% bonds with a face value of $50,000.The bonds are sold for $46,000.The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31,ten years from now.Elias records straight-line amortization of the bond discount.The bond interest expense for the year ended December 31 of the first year is
A) $5,000
B) $5,200
C) $5,800
D) $5,400
Q2) The market interest rate related to a bond is also called the
A) stated interest rate
B) effective interest rate
C) contract interest rate
D) straight-line rate
Q3) If the market rate of interest is greater than the contractual rate of interest,bonds will sell
A) at a premium
B) at face value
C) at a discount
D) only after the stated rate of interest is increased
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Chapter 12: Corporations: Organization, stock Transactions, and Dividends
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Q1) In which section of the financial statements would Paid-In Capital from Sale of Treasury Stock be reported?
A) other expense on income statement
B) intangible asset on the balance sheet
C) stockholders' equity on balance sheet
D) other income on income statement
Q2) The charter of a corporation provides for the issuance of 100,000 shares of common stock.Assume that 40,000 shares were originally issued and 10,000 were subsequently reacquired.What is the number of shares outstanding?
A) 10,000
B) 40,000
C) 30,000
D) 50,000
Q3) Which of the following is not classified as paid-in capital on the balance sheet?
A) common stock
B) common stock distributable
C) excess of issue price over par
D) treasury stock
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) In preparing the statement of cash flows,the correct order of reporting cash activities is financing,operating,and investing.
A)True
B)False
Q2) Firefly Inc.sold land for $225,000 cash.The land had been purchased five years earlier for $275,000.The loss on the sale was reported on the income statement.On the statement of cash flows,what amount should Firefly report as an investing activity from the sale of the land?
A) $225,000
B) $275,000
C) $50,000
D) $500,000
Q3) Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current operations.
A)True
B)False
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Which of the following would appear as an unusual item on the income statement?
A) loss resulting from the sale of fixed assets
B) gain resulting from the disposal of a segment of the business
C) presentation of earnings per share
D) stock split
Q2) A balance sheet shows cash,$75,000; marketable securities,$115,000; receivables,$150,000; and inventories,$222,500.Current liabilities are $225,000.The current ratio is 2.5.
A)True
B)False
Q3) The percent of fixed assets to total assets is an example of A) vertical analysis
B) solvency analysis
C) profitability analysis
D) horizontal analysis
Q4) On a common-sized income statement,all items are stated as a percent of total assets or equities at year-end.
A)True
B)False
Q5) Define solvency and profitability.How are they alike?
Page 16
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Chapter 15: Introduction to Managerial Accounting
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Sample Questions
Q1) The production labor wages for the bar stool assemblers
A)Direct
B)Indirect
Q2) Depreciation on factory plant and equipment is an example of factory overhead cost.
A)True
B)False
Q3) Managers do not need to consider the social and environmental settings in which a business operates.
A)True
B)False
Q4) Factory overhead includes
A) factory rent and direct labor
B) direct materials and direct labor
C) indirect materials and direct materials
D) indirect labor and indirect materials
Q5) Nails and screws used in the production of the bar stools
A)Product
B)Period
Q6) Differentiate between a line department and a staff department.
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Chapter 16: Job Order Costing
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Sample Questions
Q1) Recording jobs completed would include a credit to
A) Factory Overhead
B) Finished Goods
C) Work in Process
D) Cost of Goods Sold
Q2) The Cavy Company estimates that the factory overhead for the following year will be $1,470,000.The company has decided that the basis for applying factory overhead should be machine hours,which is estimated to be 40,000 hours.Calculate the predetermined overhead rate to apply factory overhead.
Q3) The Cavy Company estimates that the factory overhead for the following year will be $1,250,000.The company has decided that the basis for applying factory overhead should be machine hours,which is estimated to be 40,000 hours.The machine hours for the month of April for all of the jobs were 4,780.If the actual factory overhead totaled $141,800,determine the over- or underapplied amount for the month.
A) $7,575 underapplied
B) $35,220 underapplied
C) $7,575 overapplied
D) $35,220 overapplied
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Chapter 17: Process Cost Systems
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Sample Questions
Q1) If a company uses a process costing system to account for the costs in its five production departments,how many work in process accounts will it use?
A) 6
B) 5
C) 4
D) 2
Q2) A form prepared periodically for each processing department summarizing the units for which the department is accountable and the units to be assigned costs and the costs charged to the department and the allocation of these costs is termed a
A) factory overhead production report
B) manufacturing cost report
C) process cost report
D) cost of production report
Q3) The cost of production report reports the cost charged to production and the costs allocated to finished goods and work in process.
A)True
B)False
Q4) Discuss how equivalent units are computed under the average cost method.
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Chapter 18: Activity-Based Costing
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Sample Questions
Q1) Calculate the cost of services for a highlight.
Q2) Using the single plantwide factory overhead rate with an allocation base of direct labor hours,how much factory overhead will Blackwelder Factory allocate to desk lamp production if actual direct hours for the period is 118,000?
A) $118,000
B) $200,000
C) $188,800
D) $125,000
Q3) ABC is used to allocate selling and administrative expenses to each product based on the product's individual differences in consuming these activities.
A)True
B)False
Q4) What is the overhead cost per unit for Rings?
A) $65.25
B) $23.25
C) $44.10
D) $64.50
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Chapter 19: Cost-Volume-Profit Analysis
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Q1) Companies with large amounts of fixed costs will generally have a high operating leverage.
A)True B)False
Q2) If fixed costs are $850,000 and the unit contribution margin is $50,profit is zero when 15,000 units are sold.
A)True B)False
Q3) The dollars available from each unit of sales to cover fixed cost and profit is the unit variable cost.
A)True
B)False
Q4) Cordell,Inc.has an operating leverage of 3.Sales are expected to increase by 9% next year.What is the expected change in operating income next year?
Q5) The reliability of cost-volume-profit analysis does not depend on the assumption that costs can be accurately divided into fixed and variable components.
A)True B)False
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Chapter 20: Variable Costing for Management Analysis
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Q1) Direct labor cost is an example of a controllable cost for the supervisor of a manufacturing department.
A)True
B)False
Q2) In variable costing,the cost of products manufactured is composed of only those manufacturing costs that increase or decrease as the volume of production rises or falls.
A)True
B)False
Q3) The amount of income under absorption costing will equal the amount of income under variable costing when units manufactured:
A) exceed units sold
B) equal units sold
C) are less than units sold
D) are equal to or greater than units sold
Q4) On the variable costing income statement,all of the fixed costs are deducted from the contribution margin.
A)True
B)False
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Chapter 21: Budgeting
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Q1) Future Technologies projected sales of 35,000 computers for this year.The estimated January 1 inventory is 3,000 units,and the desired December 31 inventory is 9,000 units.What is the budgeted production (in units)for the year?
Q2) Budgets are prepared in the Accounting Department and monitored by various department managers.
A)True
B)False
Q3) The cash budget presents the expected inflow and outflow of cash for a specified period of time.
A)True
B)False
Q4) A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is termed
A) flexible budgeting
B) continuous budgeting
C) zero-based budgeting
D) master budgeting
Q5) What is a capital expenditures budget?
Q6) What is a cash budget? How does management use a cash budget?
Page 23
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Chapter 22: Evaluating Variances From Standard Costs
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Q1) The principle of exceptions allows managers to focus on correcting variances between standard costs and actual costs.
A)True
B)False
Q2) If the price paid per unit differs from the standard price per unit for direct materials,the variance is a
A) variable variance
B) controllable variance
C) price variance
D) volume variance
Q3) Standard costs serve as a device for measuring efficiency.
A)True
B)False
Q4) If employees are given bonuses for exceeding normal standards,the standards may be very effective in motivating employees.
A)True
B)False
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24
Chapter 23: Evaluating Decentralized Operations
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Q1) How much will Division 6's income from operations increase?
A) $8,000
B) $15,000
C) $80,000
D) $150,000
Q2) The minimum acceptable divisional income from operations is set by top management by establishing a minimum rate of return considered acceptable for invested assets.
A)True
B)False
Q3) The approach that required the transfer price to be less than the market price but greater than the supplying division's variable costs per unit is called the
A) cost price approach
B) negotiated cost approach
C) standard cost approach
D) market price approach
Q4) The ratio of sales to investment is termed the rate of return on investment.
A)True
B)False
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Chapter 24: Differential Analysis and Product Pricing
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Q1) Assume that Widgeon produced enough product with the highest contribution margin per unit to use 1,000 hours of machine time.Product demand does not warrant any more production of that product.What is the maximum additional contribution margin that can be realized by utilizing the remaining 1,000 hours on the product with the second highest contribution margin per hour?
A) $35,000
B) $7,000
C) $4,000
D) $28,000
Q2) A document that initiates a product or process change
A)Engineering change order
B)Total cost concept
C)Variable cost concept
D)Normal selling price
E)Setup
Q3) Which equation better describes target costing?
A) Selling price - Desired profit = Target costs
B) Selling price + Profit = Target costs
C) Target variable costs + Contribution margin = Selling price
D) Selling price = Profit - Target variable costs
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Chapter 25: Capital Investment Analysis
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Q1) Using the tables above,what would be the present value of $25,000 (rounded to the nearest dollar)to be received 4 years from today,assuming an earnings rate of 10%?
A) $19,800
B) $17,075
C) $79,250
D) $15,525
Q2) Brunette Company is contemplating investing in a new piece of manufacturing machinery.The amount to be invested is $180,000.The present value of the future cash flows generated by the project is $163,000.Should they invest in this project?
A) yes,because the rate of return on the project exceeds the desired rate of return used to calculate the present value of the future cash flows
B) no,because the rate of return on the project is less than the desired rate of return used to calculate the present value of the future cash flows
C) no,because net present value is +$17,000
D) yes,because the rate of return on the project is equal to the desired rate of return used to calculate the present value of the future cash flows
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Chapter 26: Lean Manufacturing and Activity Analysis
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Q1) From the foregoing information,determine the production costs transferred to Cost of Goods Sold during August.
A) $369,840
B) $408,480
C) $428,800
D) $473,600
Q2) From the foregoing information,determine the budgeted cell conversion cost per unit.
A) $240.00
B) $268.00
C) $296.00
D) $1,842.50
Q3) A local college is aggressively working to reduce the time it takes students to enroll for each semester.Which of the following changes would not help achieve this goal?
A) Counselors are specializing in common degree plans
B) One application is good at the community college and at the transferring university
C) A one stop area includes admissions,advising,registration and student ID's
D) Having more number of staff to help facilitate admission process
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