Accounting for Decision Making Final Exam Questions
Course Introduction
Accounting for Decision Making introduces students to the fundamental concepts and techniques of accounting that support effective managerial planning, control, and decision-making. The course emphasizes the use of financial and management accounting information to analyze business performance, assess costs and profitability, and guide strategic choices. Students learn to interpret financial statements, prepare budgets, conduct variance analysis, and apply cost-volume-profit analysis in practical business scenarios. By integrating real-world case studies and hands-on exercises, the course equips students with the critical analytical skills needed to make informed decisions that drive organizational success.
Recommended Textbook
Cornerstones of Financial Accounting 3rd Edition by Jay Rich
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Chapter 1: Accounting and the Financial Statements
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Sample Questions
Q1) The step of listing the liabilities of the company in order of their time to maturity is performed for a financial statement called ____________________.
Answer: classified balance sheet
Q2) Which of the following is the correct date format for the financial statement heading?
A)Balance Sheet for the Year Ended June 30, 2013
B)Income Statement at December 31, 2013
C)Income Statement for the Year Ended December 31, 2013
D)Statement of Retained Earnings at December 31, 2013
Answer: C
Q3) Refer to Baker's Pride Bakery. How much of the company is financed by owners at the end of December 2013?
Answer: The amount of financing by owners for 2013 is represented by the amount of stockholders' equity, $145,320. Over time, sales of stock and earnings retained by the company (cumulative net income minus cumulative dividends)cause the amount of stockholders' equity to increase.
Q4) Patents
Answer: A
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Chapter 2: The Accounting Information System
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Sample Questions
Q1) A device used to record increases and decreases in each of the basic elements of the financial statements.
Answer: A
Q2) Which of the following is a constraint to the qualitative characteristics of useful accounting information?
A)conservatism
B)materiality
C)relevance
D)comparability
Answer: B
Q3) Intangibles
Answer: A
Q4) This principle requires that the activities of a company be initially measured at their exchange price at the time the activity occurs.
Answer: G
Q5) Under the double-entry system of accounting, a debit is always a negative entry.
A)True
B)False
Answer: False
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Chapter 3: Accrual Accounting
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Sample Questions
Q1) Based on its income for the month, a company estimates that it will owe $23,000 of federal income taxes for the month of May. What is the effect of the adjustment on the financial statements?
A)increase stockholders' equity
B)increase income taxes expense
C)increase retained earnings
D)decrease income taxes payable
Answer: B
Q2) Expenses should be matched against revenue
A)before the earnings process is complete.
B)only after cash is collected from the customer.
C)in the same period as the revenue that they helped generate.
D)after payment has been made for any costs related to the revenue.
Answer: C
Q3) Land
Answer: B
Q4) The cost of salaries earned by employees, but not paid at the end of the accounting period, is recorded
Answer: C
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Chapter 4: Internal Control and Cash
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Sample Questions
Q1) When reconciling a bank account, the company must prepare an adjusting entry for deposits in transit.
A)True
B)False
Q2) An amount recorded as an increase in the company's cash account at the end of the period, but which has not yet been reflected on the bank statement is called a(n)____________________.
Q3) The sole purpose for creating an internal control system is to deter embezzlement.
A)True
B)False
Q4) Strategic risk assessment is designed to identify, analyze, and manage possible threats to the organization's success concerning ____________________ forces such as competitors, customers, suppliers, and PEST factors.
Q5) Monthly statements are mailed to customers to indicate the current balance due.
Q6) Bank service charge on the bank statement for new checks
Q7) Consists of the methods and records used to identify, measure, record, and communicate financial information about a business
Q8) Interest earned on the checking account for May
Page 6
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Chapter 5: Sales and Receivables
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Q1) What is the distinguishing characteristic between accounts receivable and notes receivable?
A)Accounts receivable are usually current assets while notes receivable are usually long-term assets.
B)Accounts receivable require payment of interest while notes receivable does not have payment of interest.
C)Notes receivable result from credit sale transactions for merchandising companies, while accounts receivable result from credit sale transactions for service companies.
D)Notes receivable generally specify an interest rate and a maturity date at which any interest and principle must be repaid.
Q2) If a company uses the direct write-off method of accounting for bad debts,
A)It establishes an estimate for the allowance for doubtful accounts.
B)It will record bad debt expense only when an account is determined to be uncollected.
C)It will reduce the accounts receivable account at the end of the accounting period for estimated uncollected accounts.
D)When an account is written off, total assets will stay the same.
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Chapter 6: Cost of Goods Sold and Inventory
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Sample Questions
Q1) Refer to the information provided for Gbane Company. How much will the company report as net purchases for 2013?
A)$221,520
B)$231,600
C)$241,680
D)$253,320
Q2) Generally speaking, the lower this measure the better.
Q3) Costs of completed items that have been sold to customers.
Q4) Refer to the information provided for Klump Co. If the company uses the FIFO inventory costing method, cost of goods sold for the month of June is:
A)$2,520.00
B)$2,538.00
C)$2,540.00
D)$2,550.00
Q5) Refer to the information provided for Robey Company. If the LIFO method is used, determine the following amounts:
A)Ending inventory on February 28th?
B)Cost of Goods sold for the month of February?
Q6) Freight costs incurred by the seller to ship goods to its customers.
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Chapter 7: Operating Assets
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Sample Questions
Q1) Using the straight-line depreciation method will cause a company to incur ____ tax expense in the early years of an asset's life than they would experience using an accelerated method of depreciation.
A)more
B)less
C)equal
D)This cannot be determined from the information given.
Q2) Refer to Fantasy Cruise Lines. What is the depreciation expense for the year ended December 31, 2013?
A)$ -0-
B)$180,000
C)$160,000
D)$200,000
Q3) Operating assets with no physical properties are called A)current assets.
B)intangible assets.
C)plant assets.
D)property, plant, and equipment.
Q4) Amortization expense
Q5) Consist of the long-lived assets that are owned by a business
Page 9
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Chapter 8: Current and Contingent Liabilities
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Sample Questions
Q1) Amounts collected from customers in advance.
Q2) Giff Services Company experienced some difficulties with cash flow so it approached one of its vendors about a payment extension. The vendor agreed to the extension on the condition that the company sign a note that includes 9% interest. What is the impact on the accounting equation of recording a note payable in exchange for the account payable?
A)Both assets and liabilities increase.
B)Both assets and liabilities decrease.
C)Liabilities increase and stockholders' equity decreases.
D)There is no net impact, as there are corresponding increases and decreases in liability accounts.
Q3) A company borrowed $50,000 on November 1, 2012, at 9% interest. The interest and principal are due on October 31, 2013.
Prepare the company's journal entries on November 1, 2012, December 31, 2012, and October 31, 2013.
Q4) Obligations that require the firm to pay cash or another current asset within one year
Q5) Current Assets / Current Liabilities
Q6) An accrued liability that represents the cost of borrowing.
Page 10
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Chapter 9: Long-Term Liabilities
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Q1) Bonds are issued at a ____________________ when the issue price exceeds the face value.
Q2) A(n)____________________ lease is recorded on the lessee's balance sheet as an asset and related liability.
Q3) If bonds were initially issued at a discount, the interest expense on the bonds calculated using the effective interest method will
A)decrease as the bonds approach their maturity date.
B)increase as the bonds approach their maturity date.
C)remain constant throughout the bonds' life.
D)fluctuate throughout the bonds' life.
Q4) Refer to King Cotton Company. Which long-term liability would also be listed in the short-term liability section? Why?
Q5) A company issued $1,000,000 of 10% notes that resulted in interest expense of $100,000 per year. What is the company's net cash outflow if the effective tax rate is 40%?
A)$100,000
B)$ 60,000
C)$ 40,000
D)$160,000
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) Capitalization of retained earnings occurs when a corporation's stock is split.
A)True
B)False
Q2) When is a liability for dividends created?
A)at the end of each fiscal year
B)at the date of declaration
C)at the date of record
D)at the date of payment
Q3) A stated amount of capital that cannot be returned to the stockholders unless the corporation is liquidated.
Q4) ____________________ shares are the maximum number of shares a corporation may issue in accordance with its corporate charter.
Q5) Distinguish between par value and market value. Which measure is the better indicator of the true value of the stock?
Q6) The portion of the stock's issue price that exceeds par.
Q7) When a corporation issued stock to stockholders, explain the use of the account for paid-in capital in excess of par value.
Q8) If a corporation has only one class of stock, this is usually it.
Q9) Stock without a par value.
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) Paid interest on a capital lease.
Q2) Which of the following transactions is not a significant noncash investing and financing activity?
A)Land is purchased by issuing a 20-year mortgage note payable.
B)Bonds are issued to purchase a building.
C)Cash equivalents are purchased.
D)Buildings are acquired by issuing common stock.
Q3) Operating activities involve the acquiring and selling of goods and services for cash or on account.
A)True
B)False
Q4) Significant noncash transactions are not reported on the statement of cash flows, but in a separate schedule shown either at the bottom of the statement of cash flows or in a note to the financial statements.
A)True
B)False
Q5) The indirect method of preparing a statement of cash flows begins with net income and then adjusts it for noncash items to produce net cash flow from
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) Why is liquidity important for businesses?
Q2) What importance is placed on a company's stock price in the ratio analysis of a company? Explain.
Q3) Average stockholders' equity
Q4) When calculating the return on common equity ratio, dividends to preferred stockholders are deducted from net income because
A)the ratio is an indicator of the return on common stockholders equity rather than the return on total equity.
B)dividends are not expenses on the current period income statement.
C)conservatism indicates that stockholders prefer a smaller numerator.
D)dividends are only available for distribution to common stockholders after the preferred stockholders have received their dividends.
Q5) ____________________ refers to the likelihood that a company will be able to pay its current obligations as they come due.
Q6) Form that companies must file with the SEC to announce major events that are important to investors and creditors.
Q7) Gross profit percentage
Q8) ____________________ analysis compares a single corporation across time.
Page 14
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Chapter 13: Investments
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Q1) The practice of adjusting the market value of securities that are accounted for using the fair value method is referred to as
A)consolidation.
B)marking-to-market.
C)passive investing.
D)segregation of investments.
Q2) Equity and debt investments that management intends to sell in the future, but not necessarily in the near term
Q3) If the investor holds 50% or more of the common stock of the investee, then the two corporations are no longer separate accounting entities and therefore must prepare ____________________ financial statements, which combine information about the two corporations as if they were a single company.
Q4) Represents an ownership interest in a corporation, usually common stock
Q5) Device that facilitates combining the financial statements of the investor and investee companies
Q6) Any voting stock not held by the parent in situations where consolidation is required because the investor acquires between 50% and 100% of the investee's stock
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Chapter 14: Time Value of Money
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Sample Questions
Q1) The interest period is the time interval between interest calculations.
A)True
B)False
Q2) In present value problems, the interest rate is also called the __________________.
Q3) Manatee Manufacturing sells a piece of equipment to make room for new machinery. Manatee will receive the sales price of $50,000 at the end of 4 years. Assuming interest at a rate of 6% per year, the Present Value of this future cash flow is how much?
A)$39,604.50
B)$39,515.50
C)$63,124.00
D)$173,255.50
Q4) Compound interest is computed on which of the following?
A)Only the original amount.
B)The original amount and any undistributed interest earned in prior periods.
C)The original amount and any distributed or undistributed interest earned in prior periods.
D)Only the distributed and undistributed interest earned in prior periods.
Q5) Cash flows are described as either single cash flows or _______________.
Page 16
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