Accounting for Decision Making Final
Exam Questions
Course Introduction
Accounting for Decision Making equips students with essential skills to interpret and utilize financial and managerial accounting information for effective business decision making. The course covers key concepts such as cost behavior, budgeting, performance measurement, and financial statement analysis, focusing on how accounting data can inform planning, control, and strategic decisions. By emphasizing real-world scenarios and case studies, students learn to evaluate the financial implications of various business choices and to communicate recommendations to stakeholders, ultimately enhancing organizational value and performance.
Recommended Textbook
Corporate Financial Accounting 15th Edition by Carl S. Warren
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Page 2
Chapter 1: Accounting and Business
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Sample Questions
Q1) A business is an organization in which basic resources or inputs, like materials and labor, are assembled and processed to provide outputs in the form of goods or services to customers.
A)True
B)False
Answer: True
Q2) A modular homebuilder
A)Service business
B)Manufacturing business
C)Retail business
Answer: B
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
Q4) What information does the income statement give to business users?
Answer: The income statement reports the revenues and expenses for a period of time. The result is either a net income or a net loss.
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Chapter 2: Double-Entry Accounting
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Sample Questions
Q1) Prepaid expenses are an example of an expense.
A)True
B)False Answer: False
Q2) To determine the balance in an account, always subtract credits from debits.
A)True
B)False Answer: False
Q3) In a basic chart of accounts, each account number has two digits. The first digit indicates the major account group to which the account belongs. Which of the following correctly identifies the major account groups typically represented by the numbers 1 through 5?
A) 1-Assets, 2-Liabilities, 3-Stockholders' Equity, 4-Expenses, 5-Revenues
B) 1-Assets, 2-Liabilities, 3-Stockholders' Equity, 4-Revenues, 5-Expenses
C) 1-Assets, 2-Stockholders' Equity, 3-Revenues, 4-Expenses, 5-Dividends
D) 1-Stockholders' Equity, 2-Dividends, 3-Revenues, 4-Expenses, 5-Common Stock
Answer: B
Q4) On October 30, JumpStart pays $3,330 in dividends to its stockholders. Provide the journal entry for this transaction.
Answer: 11ea84e6_b038_378d_9a63_d32ea8b4ec6d_TB2281_00_TB2281_00
Page 4
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Chapter 3: Adjustments: Accruals and Deferrals
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Sample Questions
Q1) Accumulated Depreciation and Depreciation Expense are classified, respectively, as
A) expense, contra asset
B) asset, contra liability
C) revenue, asset
D) contra asset, expense
Answer: D
Q2) Prior to the adjusting process, accrued expenses have
A) not yet been incurred, paid, or recorded
B) been incurred, not paid, but have been recorded
C) been incurred, not paid, and not recorded
D) been paid but have not yet been incurred
Answer: C
Q3) The account type and normal balance of Unearned Revenue is A) revenue, credit
B) expense, debit
C) liability, credit
D) asset, debit
Answer: C
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5
Chapter 4: The Accounting Cycle
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Sample Questions
Q1) Identify which of the following accounts should be closed with a debit or a credit to Income Summary at the end of the fiscal year. If it is not closed to Income Summary, mark as n/a.
Q2) Describe a classified balance sheet.
Q3) List and describe the purpose of the four closing entries.
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Chapter 5: Accounting for Retail Businesses
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Sample Questions
Q1) Why does the gross method of recording sales discounts require an adjusting entry at the end of the fiscal period?
Q2) Under the periodic inventory system, the cost of goods sold is recorded when sales are made.
A)True
B)False
Q3) Emma Co. sold to Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record the payment for the merchandise if Isabella Co. pays within the discount period?
A) Accounts Payable-Emma Co., debit $15,000; Cash, credit $15,000
B) Accounts Payable-Emma Co., debit $15,450; Cash, credit $15,450
C) Accounts Payable-Emma Co., debit $15,000; Freight In, debit $750; Cash, credit $15,750
D) Accounts Payable-Emma Co., debit $15,750; Inventory, debit $300; Cash, credit $16,050
Q4) In retail businesses, inventory is reported as a current asset.
A)True
B)False
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Chapter 6: Inventories
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Sample Questions
Q1) The choice of an inventory costing method has no significant impact on the financial statements.
A)True
B)False
Q2) What is the amount of cost of goods sold for the year according to the FIFO method?
A) $1,380
B) $1,375
C) $1,510
D) $1,250
Q3) The ending inventory cost using FIFO is
A) $1,250
B) $1,350
C) $1,375
D) $1,150
Q4) During periods of decreasing costs, the use of the LIFO method of costing inventory will result in a lower amount of net income than would result from the use of the FIFO method.
A)True B)False
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Chapter 7: Internal Control and Cash
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Sample Questions
Q1) The bank often informs the company of bank service charges by including a credit memo with the monthly bank statement.
A)True
B)False
Q2) The control environment in an internal control structure is the overall attitude of management and employees about the importance of internal control.
A)True
B)False
Q3) "To maintain public confidence and trust in the financial reporting of companies" is the purpose of
A) the FASB
B) the IRS
C) Sarbanes-Oxley
D) GAAP
Q4) The amount of deposits in transit is included on the bank reconciliation as a(n)
A) deduction from the balance per the company's books
B) deduction from the balance per bank statement
C) addition to the balance per bank statement
D) addition to the balance per company books
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Chapter 8: Receivables
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Sample Questions
Q1) When does an account become uncollectible?
A) when accounts receivable is converted into notes receivable
B) when a discount is available on notes receivable
C) there is no general rule for when an account becomes uncollectible
D) at the end of the fiscal year
Q2) A 60-day, 9% note for $10,000, dated May 1, is received from a customer on account. The maturity value of the note is
A) $10,000
B) $10,150
C) $10,900
D) $9,100
Q3) At the end of the current year, Accounts Receivable has a balance of $700,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $3,500,000. Bad debt expense is estimated at 1/2 of 1% of net sales.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of accounts receivable.
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10
Chapter 9: Long-Term Assets: Fixed and Intangible
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Sample Questions
Q1) Modifying a building purchased for new business location
A)Land improvements
B)Buildings
C)Land
D)Machinery and equipment
Q2) Amortization Expense
A)Current Assets
B)Fixed Assets
C)Intangible Assets
D)Current Liability
E)Long-Term Liability
F)Owners' Equity
G)Revenues
H)Operating Expenses
I)Other Income/Expense
Q3) Interest on money borrowed to finance construction of new office building
A)Buildings
B)Machinery and equipment
C)Land
D)Land improvements
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Chapter 10: Liabilities: Current, Installment Notes, and Contingencies
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Sample Questions
Q1) On January 1, Year 1, Zero Company obtained a $52,000, 4-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, Year 1. The December 31, Year 3 carrying amount in the allocation of periodic payments table for this installment note will be equal to A) $0
B) $13,000
C) $14,252
D) $6,463
Q2) The entry to record accrual of employer's payroll taxes would include a
A) debit to Payroll Tax Expense for $2,500
B) debit to FICA Taxes Payable for $1,800
C) credit to Payroll Tax Expense for $248
D) debit to Payroll Tax Expense for $1,148
Q3) The proceeds of a discounted note are equal to the face value of the note.
A)True
B)False
Q4) Payroll taxes are based on the employee's net pay.
A)True
B)False
Q5) List five internal controls that relate directly to payroll.
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Chapter 11: Liabilities: Bonds Payable
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Sample Questions
Q1) Balance sheet and income statement data indicate the following: \[\begin{array} { l r }
\text { Bonds payable, } 6 \% \text { (due in } 15 \text { years) } & \$ 1,200,000 \\
\text { Income before income tax for year } & 320,000 \\
\text { Income tax for year } & 80,000 \\
\text { Interest payable } & 33,000 \\
\text { Interest receivable } & 19,000
\end{array}\]
Based on the data presented above, what is the times interest earned ratio? (Round to two decimal places.)
A) 5.00
B) 5.44
C) 4.00
D) 4.33
Q2) On the first day of the fiscal year, a company issues a $500,000, 8%, 10-year bond that pays semiannual interest of $20,000 ($500,000 × 8% × 1/2), receiving cash of $437,740. Journalize the entry to record the issuance of the bonds.
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Page 13
Chapter 12: Corporations: Organization, Stock Transactions, and Dividends
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Sample Questions
Q1) Nexis Corp. issues 1,000 shares of $15 par value common stock at $22 per share. When the transaction is recorded, credit(s) are made to:
A) Common Stock, $15,000, and Paid-In Capital in Excess of Par, $7,000
B) Common Stock, $22,000, and Retained Earnings, $15,000
C) Common Stock, $7,000, and Paid-In Capital in Excess of Stated Value, $15,000
D) Common Stock, $22,000
Q2) If the dividend amount of preferred stock, $50 par value, is quoted as 8%, then the dividends per share would be $4.
A)True
B)False
Q3) A disadvantage of the corporate form of business entity is
A) single taxation of dividends
B) unlimited liability for stockholders
C) corporations are subject to more governmental regulations
D) the ease of transfer of ownership
Q4) If 50,000 shares are authorized, 41,000 shares are issued, and 2,000 shares are reacquired, the number of outstanding shares is 43,000.
A)True
B)False
Page 14
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine the following: (a) If sales for the current year were \(\$ 695,000\) and accounts receivable decreased by \(\$ 43,500\) during the year, what was the amount of cash received from customers?
(b) If income tax expense for the current year was \(\$ 56,000\) and income tax payable decreased by \(\$ 5,200\) during the year, what was the amount of cash payments of income tax?
Q2) Land costing $140,000 was sold for $173,000 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?
A) $173,000
B) $140,000
C) $313,000
D) $33,000
Q3) Cash flows from investing activities, as part of the statement of cash flows, would include any receipts from the issuance of bonds payable.
A)True
B)False
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Page 15
Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Using measures to assess a business's ability to pay its current liabilities is called current position analysis.
A)True
B)False
Q2) What is the price-earnings ratio for Diane Company?
A) 8.0 times
B) 2.5 times
C) 4.0 times
D) 6.0 times
Q3) The numerator in calculating the accounts receivable turnover is
A) total assets
B) sales
C) accounts receivable at year-end
D) average accounts receivable
Q4) A change from one acceptable accounting method to another is reported
A) on the statement of stockholders' equity, as a correction to the beginning balance
B) on the income statement, below income from continuing operations
C) on the income statement, above income tax expense
D) through a retroactive restatement of prior-period earnings
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Chapter 15:Investments
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Sample Questions
Q1) The income statement for Hudson Company reported net income of $345,000 for the year ended December 31 before considering the following: \(\bullet\)During the year the company purchased trading securities. \(\bullet\)At year end, the fair value of the investment portfolio was $23,000 less than cost.
\(\bullet\)The balance of Retained Earnings was $823,000 on January 1. \(\bullet\)Hudson Company paid $43,000 in cash dividends during the year. Calculate the balance of Retained Earnings on December 31.
Q2) Gale Company owns 87% of the outstanding stock of Leonardo Company. Leonardo Company is referred to as the A) parent
B) minority interest
C) affiliate
D) subsidiary
Q3) On May 1, Cedar Inc. purchases $100,000 of 10-year, Madison Corporation 6% bonds dated March 1 at 100 plus accrued interest. What entry would Cedar record when receiving its semiannual interest on September 1?
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