Accounting for Decision Making Exam Practice Tests
Course Introduction
Accounting for Decision Making is designed to equip students with the foundational knowledge and analytical skills needed to interpret and utilize accounting information for effective business decision-making. The course covers essential topics such as financial statement analysis, cost behavior, budgeting, performance evaluation, and relevant cost concepts for short-term and long-term decisions. Through a mix of theoretical frameworks and practical case studies, students learn how to apply accounting data to planning, controlling, and strategic decision processes, enabling them to make informed choices that drive organizational success.
Recommended Textbook
Financial Accounting 8th Edition by Walter T. Harrison
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13 Chapters
1996 Verified Questions
1996 Flashcards
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Page 2
Chapter 1: The Financial Statements
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162 Verified Questions
162 Flashcards
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Sample Questions
Q1) Net income is:
A)added to assets on the balance sheet.
B)deducted from beginning retained earnings on the retained earnings statement.
C)added to beginning retained earnings on the retained earnings statement.
D)deducted from ending retained earnings on the retained earnings statement.
Answer: C
Q2) Dividends:
A)are expenses.
B)always affect net income.
C)are distributions to stockholders of assets (usually cash)generated by net income.
D)are distributions to stockholders of assets (usually cash)generated by a favorable balance in retained earnings.
Answer: D
Q3) Financial accounting provides budgeting information to a company's managers.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Transaction Analysis
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) Which of the following statements regarding a trial balance is TRUE?
A)A trial balance may be taken at any time during the accounting period.
B)A trial balance is a list of all accounts with their balances.
C)A trial balance shows that total debits equals total credits.
D)All of the above are true.
Answer: D
Q2) If a posting error has occurred when recording a transaction by posting a debit as a credit, then the out-of-balance amount will be evenly divisible by: A)11.
B)9)
C)2)
D)5)
Answer: C
Q3) The Dividends account indicates an increase in common stock.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Accrual Accounting Income
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) On September 1, Banger Bros. Company paid $9,000 for one year of rent, in advance. Which of the following accounts and amounts will appear on an adjusted trial balance prepared on December 31?
A)Prepaid Rent, $9,000
B)Prepaid Rent, $3,000
C)Rent Expense, $6,000
D)Rent Expense, $3,000
Answer: D
Q2) Which of the following accounts is considered a "temporary" account?
A)Inventory
B)Rent Expense
C)Accounts Payable
D)Common Stock
Answer: B
Q3) The quick ratio measures a company's ability to pay its total liabilities.
A)True
B)False Answer: False
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Chapter 4: Internal Control Cash
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) Proper segregation of duties increases the chances for fraud and promotes the accuracy of accounting records.
A)True
B)False
Q2) A payment packet:
A)reports the arrival of items purchased.
B)is sent by the purchasing department to the vendor selling the item.
C)identifies the need for merchandise and begins the purchasing process.
D)includes the invoice, receiving report and purchase order.
Q3) The rule that all major groups of transactions should be supported by hard copy documents or electronic records is part of the control procedure of:
A)limited access.
B)segregation of duties.
C)adequate records.
D)proper approvals.
Q4) The journal entry for a NSF check involves a credit to Accounts Receivable.
A)True
B)False
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Chapter 5: Short-Term Investments Receivables
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165 Verified Questions
165 Flashcards
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Sample Questions
Q1) Subsidiary records provide no information about control accounts.
A)True
B)False
Q2) The direct write-off method records uncollectible-account expense:
A)at the end of the year.
B)at the end of the accounting period.
C)when the specific account receivable is determined to be uncollectible.
D)under the percent-of-sale method.
Q3) The journal entry to record a note received from a customer for the sale of services is:
A)debit Note Receivable and credit Service Revenue.
B)debit Service Revenue and credit Note Receivable.
C)debit Note Payables and credit Note Receivable.
D)debit Note Receivable and credit Accounts Receivable.
Q4) Short-term investments may be divided into held-to-maturity securities, trading securities and available-for-sale securities.
A)True
B)False
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Chapter 6: Inventory and Cost of Goods Sold
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) Ending inventory for the year ended December 31, 2010, is understated. How will this error affect net income for 2010 and 2011?
A)2010 overstated; 2011 understated
B)2010 understated; 2011 overstated
C)2010 overstated; 2011 no effect
D)2010 understated; 2011 no effect
Q2) When inventory prices are falling, the LIFO costing method will generally result in a:
A)lower gross profit than under FIFO.
B)higher gross profit than under FIFO.
C)lower inventory value than under FIFO.
D)lower owners' equity balance than under FIFO.
Q3) Using the lower-of-cost-or-market rules to value ending inventory complies with the ongoing principles of accounting.
A)True
B)False
Q4) Inventory is presented on the balance sheet at the selling price of the item.
A)True
B)False
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Chapter 7: Plant Assets Intangibles
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181 Verified Questions
181 Flashcards
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Sample Questions
Q1) If at the end of the year, goodwill is worth more than at the beginning of the year, then an entry must be made to increase the goodwill.
A)True
B)False
Q2) Using an accelerated depreciation method will cause a profitable company to incur:
A)less taxes in early years of the asset's use as compared to later years.
B)more taxes in early years of the asset's use as compared to later years.
C)the same amount of taxes in early years of the asset's use as in the later years.
D)none of the above.
Q3) Book value equals the cost of the asset less the total accumulated depreciation.
A)True
B)False
Q4) Double-declining-balance depreciation computes total depreciation by multiplying the asset's book value by two times the straight-line rate.
A)True
B)False
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Chapter 8: Liabilities
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185 Verified Questions
185 Flashcards
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Sample Questions
Q1) A company wishing to expand can obtain the necessary funds by borrowing on a long-term note payable or by issuing 50,000 shares of $10 par value common stock. Net income is estimated at $302,500 if the company borrows the funds, and $330,000 if the company issues stock. The company currently has 250,000 shares of common stock outstanding. If the company issues stock instead of borrowing funds, earnings per share would
A)decrease by $0.21.
B)decrease by $0.11.
C)increase by $0.21.
D)increase by $0.10.
Q2) Speedo sales had monthly sales of $773,000. There is a 7% state sales tax. The amount of the sales tax payable is:
A)$50,570.
B)$54,110.
C)$63,250.
D)$71,242.
Q3) Bond prices are quoted as a percentage of their par value.
A)True
B)False
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Page 10
Chapter 9: Stockholders Equity
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177 Verified Questions
177 Flashcards
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Sample Questions
Q1) In a corporation, the ownership is separate from the management.
A)True
B)False
Q2) Return on equity is only computed on common stock because the return to preferred stockholders is the specified dividend expressed as a percentage or a fixed dollar amount.
A)True
B)False
Q3) Monteverde Company repurchased 1,000 shares of its $5 par value common stock at $10 per share. The entry to record this transaction includes a:
A)debit to Common Stock for $5,000.
B)debit to Treasury Stock for $5,000.
C)debit to Common Stock for $10,000.
D)debit to Treasury Stock for $10,000.
Q4) The amount of stock the state charter allows a corporation to issue is called authorized stock.
A)True
B)False
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11
Chapter 10: Long-Term Investments International Operations
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) If an investment is liquid and the investor intends to convert the investment to cash within one year, the investment will be classified as:
A)long-term.
B)equity.
C)short-term.
D)either long-term or short term.
Q2) Which of the following is the method used when one company owns more than 50% of the shares of another company?
A)Market value method
B)Consolidation method
C)Equity method
D)Amortized method
Q3) The market value of an available-for-sale security has increased from the last carrying value. The journal entry to record this increase will include:
A)a debit to the Allowance to Adjust Investment to Market.
B)a credit to the Allowance to Adjust Investment to Market.
C)a debit to the Unrealized Gain on Investment.
D)none of the above.
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Chapter 11: The Income Statement the Statement of
Stockholders Equity
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) Which of the following statements is TRUE?
A)The income tax return and the financial statements are the same documents.
B)The income tax return is prepared using GAAP.
C)The income tax return is prepared using rules set by the IRS.
D)Taxable income is found on the income statement.
Q2) The financial statement that reports the changes in all categories of equity during the period is called the:
A)statement of retained earnings.
B)statement of changes in financial position.
C)statement of stockholders' equity.
D)statement of change in total equity.
Q3) "Top line" decline means that cost of goods sold is declining.
A)True
B)False
Q4) For most companies, tax expense equals tax payable.
A)True
B)False
Q5) The purpose of channel stuffing is to decrease operating expenses.
A)True
B)False
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Chapter 12: The Statement of Cash Flows
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133 Flashcards
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Sample Questions
Q1) Under the direct method of preparing the statement of cash flows, cash payments from investing activities include:
A)payment of dividends.
B)payments to suppliers.
C)purchase of treasury stock.
D)acquisition of plant assets.
Q2) Under the direct method of preparing the statement of cash flows, which statement is CORRECT regarding the method of computing interest revenue?
A)Interest revenue plus a decrease in interest receivable
B)Sales plus a decrease in interest receivable
C)Interest revenue less a decrease in interest receivable
D)Interest revenue plus an increase in interest receivable
Q3) The category of cash flows that creates revenues, expenses, gains, and losses is:
A)financing activities.
B)investing activities.
C)operating activities.
D)all of the above.
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Chapter 13: Financial Statement Analysis
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) The rate of return on net sales is calculated as:
A)net income divided by net sales.
B)operating income divided by net sales.
C)dividends paid during the year divided by net sales.
D)gross profit divided by net sales.
Q2) Assume a company has working capital equal to $23,000 and total current liabilities equal to $75,000. The current ratio:
A)is 0.31.
B)is 1.31.
C)is 3.26.
D)cannot be determined from this information.
Q3) Economic value added may be computed as:
A)the change in capital/net income.
B)net income + interest expense - the capital charge.
C)the change in capital × (net income + interest expense).
D)net income/the change in capital.
Q4) The rate of return on net sales shows the percentage of each sales dollar earned as net income.
A)True
B)False
Page 15
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