Accounting for Decision Making Mock
Exam
Course Introduction
Accounting for Decision Making equips students with the fundamental principles and tools of accounting that support effective managerial decision-making in organizations. The course emphasizes the use of financial and non-financial information in planning, controlling, and evaluating business operations. Topics include cost analysis, budgeting, performance measurement, and relevant cost concepts, enabling students to critically assess business scenarios and make informed choices. Through real-world case studies and practical exercises, students learn to interpret accounting data and communicate recommendations that contribute to organizational goals.
Recommended Textbook
Financial and Managerial Accounting Information for Decisions 5th Edition by John J Wild
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Chapter 1: Introducing Accounting in Business
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Sample Questions
Q1) The income statement reports all of the following except:
A) Revenues earned by a business.
B) Expenses incurred by a business.
C) Assets owned by a business.
D) Net income or loss earned by a business.
E) The time period over which the earnings occurred.
Answer: C
Q2) Ending liabilities are 67,000,beginning equity was $87,000,common stock issued during year totaled $31,000,expenses for the year were $22,000,dividends declared totaled $13,000,ending equity for the year is $181,000,and beginning assets for the year were $222,000.
What was net income for the year?
A) $ 41,000
B) $ 76,000
C) $ 53,000
D) $ 98,000
E) $ 35,000
Answer: B
Q3) ______________ is the area of accounting aimed at serving external users.
Answer: Financial accounting
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Chapter 2: Analyzing and Recording Transactions
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Sample Questions
Q1) A record of the increases and decreases in a specific asset,liability,equity,revenue,or expense is a(n):
A) Journal
B) Posting
C) Trial balance
D) Account
E) Chart of accounts
Answer: D
Q2) What is a trial balance? What is its purpose?
Answer: The trial balance is a list of all of the accounts in the ledger with balances at a point in time.The list is organized by debit and credit balances.The purpose of the trial balance is to summarize the account totals and to verify the accuracy of the total debits and credits.If the total debits and credits are not equal,then the trial balance is out of balance,which indicates an error in the accounting records.However,even if debits do equal credits,this is no guarantee that no errors were made in recording and posting transactions.
Q3) A company had total assets of $350,000; total liabilities of $101,500; and total equity of $248,500.Calculate its debt ratio.
Answer: $101,500/$350,000 = 29%
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Page 4
Chapter 3: Adjusting Accounts and Preparing Financial Statements
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Q1) A company paid $6,000 for a six-month insurance policy.The policy coverage began on February 1.On February 28,$100 of insurance expense must be recorded.
A)True
B)False
Answer: False
Q2) IFRS tends to be more principles-based compared with GAAP,which is viewed as more rules-based.Which of the following is a true statement about a principles-based system?
A) A principles-based system eliminates the need for internal controls.
B) A principles-based system is significantly weaker than a rules-based system.
C) A principles-based system will eliminate all fraud.
D) A principles-based system is a way to calculate interest receivable or payable.
E) A principles-based system depends heavily on control procedures to reduce the potential for fraud or misconduct.
Answer: E
Q3) A ____________________ is useful in preparing interim statements and in showing the effects of proposed transactions.
Answer: worksheet
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Chapter 4: Accounting for Merchandising Operations
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Q1) Calculate the gross margin ratio for each of the following separate cases A through D:
\(\begin{array}{|l|r|r|r|r|}
\hline& \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} \\ \hline \text { Net sales } & \$ 135,000 & \$ 623,500 & \$ 37,800 & \$ 259,600 \\ \hline \text { Cost of goods sold } & 83,600 & 249,200 & 13,230 & 127,204 \\ \hline
\end{array}\)
Q2) Credit terms include the specifics regarding the amount owed and timing of payments from a buyer to a seller.
A)True
B)False
Q3) Sales less sales discounts less sales returns and allowances equals:
A) Net purchases.
B) Cost of goods sold.
C) Net sales.
D) Gross profit.
E) Net income.
Q4) Explain the cost flows and operating activities of a merchandising company.
Q5) List the steps of the operating cycle for a merchandiser with credit sales.
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Chapter 5: Inventories and Cost of Sales
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Q1) LIFO inventory value is often less than the inventory's replacement cost because LIFO inventory is valued using the oldest purchase cost.
A)True
B)False
Q2) The understatement of the ending inventory balance causes:
A) Cost of goods sold to be overstated and net income to be understated.
B) Cost of goods sold to be overstated and net income to be overstated.
C) Cost of goods sold to be understated and net income to be understated.
D) Cost of goods sold to be understated and net income to be overstated.
E) Cost of goods sold to be overstated and net income to be correct.
Q3) Explain why the lower of cost or market rule is used to value inventory.
Q4) Goods on consignment are goods shipped by their owner,called the consignee,to another party called the consignor.
A)True
B)False
Q5) What costs are assigned to merchandise inventory?
Q6) The _____________________ method of assigning costs to inventory and cost of goods sold assumes that the inventory items are sold in the order acquired.
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Chapter 6: Cash and Internal Controls
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Sample Questions
Q1) A remittance advice is:
A) An explanation for a payment by check.
B) A bank statement.
C) A voucher.
D) An EFT.
E) A canceled check.
Q2) ________________ includes currency,coins,and amounts on deposit in checking accounts and many savings accounts.
Q3) Michael Inwald of CHEESEBOY maintains a system of internal controls and managing cash.Identify some of these internal controls and explain how they contribute to the success of the company.
Q4) Prenumbered printed checks are an example of which internal control principle?
A) Technological controls.
B) Maintain adequate records.
C) Perform regular and independent reviews.
D) Establish responsibilities.
E) Divide responsibility for related transactions.
Q5) _________________________ is the electronic transfer of cash from one party to another.
Page 8
Q6) Define an internal control system and describe the purpose that it serves.
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Chapter 7: Accounts and Notes Receivable
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Q1) A company borrowed $1,000 by signing a six-month promissory note at 5% interest.The total amount of interest on this promissory note is $25.
A)True
B)False
Q2) A supplementary record created to maintain a separate account for each customer is called the ________________________.
Q3) The accounts receivable turnover is calculated by:
A) Dividing net sales by average accounts receivable.
B) Dividing net sales by average accounts receivable and multiplying by 365.
C) Dividing average accounts receivable by net sales.
D) Dividing average accounts receivable by net sales and multiplying by 365.
E) Dividing net income by average accounts receivable.
Q4) The interest accrued on $3,600 at 7% for 60 days is:
A) $36
B) $42
C) $252
D) $180
E) $420
Q5) Explain how to record the receipt of a note receivable.
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Chapter 8: Long-Term Assets
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Q1) Once the estimated depreciation expense for an asset is calculated:
A) It cannot be changed due to the historical cost principle.
B) It may be revised based on new information.
C) Any changes are accumulated and recognized when the asset is sold.
D) The estimate itself cannot be changed; however, new information should be disclosed in financial statement footnotes.
E) It cannot be changed due to the consistency principle.
Q2) Revenue expenditures:
A) Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities.
B) Are known as balance sheet expenditures.
C) Extend the asset's useful life.
D) Substantially benefit future periods.
E) Are debited to asset accounts.
Q3) An ore deposit costing $800,000 is expected to produce 1,600,000 tons of ore.A total of 70,000 tons are mined and sold in the current year.The depletion expense for the current year is $35,000.
A)True
B)False
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Chapter 9: Current Liabilities
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Q1) A company sells computers for $1,800 each.Each computer has a two-year warranty that covers replacement of defective parts.It is estimated that 2% of all computers sold will be returned under the warranty with an average cost of $150 each.During November,the company sold 30,000 computers;.400 computers were serviced under the warranty during November at a total cost of $55,000.The balance in the Estimated Warranty Liability account at November 1 was $29,000.What is the company's warranty expense for the month of November?
A) $26,000
B) $45,000
C) $55,000
D) $60,000
E) $90,000
Q2) Times interest earned ratio is computed by dividing _______________ by interest expense.
Q3) FICA taxes include:
A) Social Security taxes
B) Charitable giving
C) Employee income taxes
D) Unemployment taxes
E) Federal taxes
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Chapter 10: Long-Term Liabilities
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Q1) A company retires its bonds at 105.The carrying value of the bonds at the date of is $103,745.The issuer's journal entry to record the retirement will include a:
A) Debit to Premium on Bonds.
B) Credit to Premium on Bonds.
C) Debit to Discount on Bonds.
D) Credit to Gain on Bond Retirement.
E) Credit to Bonds Payable.
Q2) A bondholder that owns a $1,000,10%,10-year bond has:
A) Ownership rights in the company who issued the bond.
B) The right to receive $10 per year until maturity.
C) The right to receive $1,000 at maturity.
D) The right to receive $10,000 at maturity.
E) The right to receive dividends of $1,000 per year.
Q3) The type of bond that provides the greatest security from theft of loss is the debenture.
A)True
B)False
Q4) _____________________ bonds can be exchanged for a fixed number of shares of the issuing corporation's common stock.
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Chapter 11: Corporate Reporting and Analysis
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Sample Questions
Q1) What is a corporation? Identify the key advantages and disadvantages of corporations.
Q2) When all of the authorized shares have the same rights and characteristics,the stock is called:
A) Preferred stock
B) Common stock
C) Par value stock
D) Stated value stock
E) No-par value stock
Q3) The amount of income earned per share of a company's common stock is known as:
A) Restricted retained earnings per share.
B) Earnings per share.
C) Continuing operations per share.
D) Dividends per share.
E) Book value per share.
Q4) _______________________ generally consist of a company's cumulative net income less any net losses and dividends declared since its inception.
Q5) Explain how to compute book value per share and discuss how it can be used to analyze the financial condition of a corporation.
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Chapter 12: Reporting Cash Flows
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Q1) A noncash investing transaction should be disclosed as either a footnote or small schedule attached to the statement of cash flows.
A)True
B)False
Q2) Cash flow information can assist internal users in planning day-to-day operating activities.
A)True
B)False
Q3) Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.
Q4) Which one of the following is representative of typical cash flows from operating activities?
A) Proceeds from collecting the principal amount of loans.
B) Repayment of principal on loans.
C) Proceeds from the issuance of bonds and notes payable.
D) Payments by a merchandiser to acquire equity securities of other companies.
E) Receipts of cash sales.
Q5) What are the five usual steps involved in the preparation of the statement of cash flows?
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Chapter 13: Analysis of Financial Statements
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Sample Questions
Q1) A company had a return on common stockholders' equity of 25%.Net income equaled $200,000 and average common stockholders' equity equaled $700,000.Compute the amount of the preferred dividends declared.
A) $200,000
B) $500,000
C) $50,000
D) $25,000
E) $175,000
Q2) The average number of times a company's inventory is sold during an accounting period,calculated by dividing cost of goods sold by the average inventory balance,is equal to the:
A) Accounts receivable turnover
B) Inventory turnover
C) Days' sales uncollected
D) Current ratio
E) Price earnings ratio
Q3) Describe ratio analysis including its purpose,application,and interpretation.
Q4) The measurement of key relationships between financial statement items is known as _____________________________.
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Chapter 14: Managerial Accounting Concepts and Principles
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Sample Questions
Q1) ____________________ inventory consists of completed products ready for sale by a manufacturer.
Q2) The total cost of goods manufactured for the year was:
A) $13,000
B) $44,500
C) $57,500
D) $94,500.
E) $52,000
Q3) Braintree Ltd.manufactures coats in a large facility.One area in the production facility is an underused storage space.The company has twice turned down offers to lease out this facility.This situation is an example of what costing concept? How should Braintree handle the costing for this situation?
Q4) Horton Foods bakes and sells 1,000 dozen bagels each week to food service operations.Among the costs are bakers' salaries,$24,000; production management salaries,$16,000; production equipment operating costs,$32,000; and flour and ingredient costs,$15,000.
Required:
(a)Calculate prime costs
(b)Calculate conversion costs.
Page 16
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Chapter 15: Job Order Costing and Analysis
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Q1) A perpetual record of a raw materials item that records data on the quantity and cost of units purchased,units issued for use in production,and units that remain in the raw materials inventory is called a(n):
A) Materials ledger card.
B) Materials requisition.
C) Purchase order.
D) Materials voucher.
E) Purchase ledger.
Q2) Cost accounting systems accumulate costs and then assign them to products or services.
A)True
B)False
Q3) A materials requisition is a source document used by production managers to request materials for manufacturing and also used to assign materials costs to specific jobs or to overhead.
A)True
B)False
Q4) When factory payroll is assigned to specific jobs,______________________ is debited.
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Chapter 16: Process Costing
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Q1) In a process cost accounting system,direct materials used are debited to the _________________ account,and indirect materials used are debited to the ______________________ account.
Q2) The following journal entry would be made to record the transfer of completed goods from Shoving to the finished goods inventory for this period: \(\begin{array}{llr}
\text { Finished Goods Inventory } &525,000\\
\text { Goods in Process Inventory, Shoving Dept } &&525,000\\ \end{array}\)
A)True B)False
Q3) The _____________ method of process costing assigns costs to units assuming a first-in,first-out flow of product.
Q4) In some circumstances,a process cost accounting system can classify wages paid to maintenance workers as direct labor costs instead of factory overhead.
A)True
B)False
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Chapter 17: Activity-Based Costing and Analysis
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Q1) Multiple cost pools are used when allocating overhead using the plantwide overhead rate method.
A)True
B)False
Q2) The ______________________ overhead rate method uses a different overhead rate for each production department.
Q3) A _______________________ overhead rate is a single overhead rate determined by using volume-related measures.
Q4) Heritage Industries uses departmental overhead rates and is planning on a $3 per direct labor hour overhead rate for the molding department.Compute the estimated manufacturing overhead cost for the molding department given the information shown in the table.
A) $487,500
B) $195,000
C) $292,500
D) $243,750
E) $692,500
Q5) Allocated overhead ____________________________ vary depending upon the allocation method used.
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Chapter 18: Cost-Volume-Profit Analysis
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Q1) The contribution margin ratio is the percentage by which the margin of safety exceeds the break-even point.
A)True
B)False
Q2) During the past year a company had total fixed costs of $70,000.Its product sold for $9 per unit.Variable costs during this time equaled $5 per unit.Next year the company is anticipating a 4% increase in total fixed costs and a $1 per unit decrease in variable costs but would like to maintain its current selling price per unit.How many units must the company sell next year to earn $1 million? (Round answer to complete units.)
A) 119,200
B) 200,000
C) 214,560
D) 268,200
E) 18,200
Q3) Unit contribution margin is the amount a product's unit selling price exceeds its total variable cost.
A)True
B)False
Q4) What is the high-low method? Briefly describe how it is applied.
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Chapter 19: Variable Costing and Performance Reporting
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Q1) Assume a company had the following production costs: \(\begin{array}{ll}
\text { Direct labor } & \$ 20,000 \\
\text { Direct material } & \$ 30,000 \\
\text { Variable overhead } & \$ 40,000 \\
\text { Fixed overhead } & \$ 50,000 \end{array}\)
Under absorption costing,the total production cost per unit when 4,000 units are produced would be $22.50.
A)True
B)False
Q2) _______________________ costing is the only acceptable basis for both external reporting and tax reporting.
Q3) Which of the following is not a product cost?
A) Direct labor.
B) Indirect manufacturing costs.
C) Direct materials.
D) Manufacturing overhead.
E) Advertising costs.
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Chapter 20: Master Budgets and Performance Planning
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Q1) Tannwin Co.sells a new product called Accountomatic and has predicted the following sales for the first four months of the current year: \(\begin{array}{ccccc}
& \text { Jan. } & \text { Feb. } & \text { March } & \text { April } \\ \text { Sales in units } & 1,700 & 1,900 & 2,100 & 1,600 \end{array}\)
Ending inventory for each month should be 20% of the next month's sales,and the prior December 31 inventory is consistent with that policy.How many units should be purchased in the first quarter of the year?
A) 5,100
B) 5,680
C) 6,300
D) 6,000
E) 5,700
Q2) The ___________________________ is prepared by manufacturing firms and takes the place of the purchases budget prepared by merchandising firms.
Q3) Describe at least five benefits of budgeting.
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Chapter 21: Flexible Budgets and Standard Costs
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Q1) The entry to record the material variances would include a:
A) Credit to Goods in Process for $133,750.
B) Debit to Direct Material Price Variance for $13,750.
C) Credit to Direct Material Quantity Variance for $13,750.
D) Debit to Goods in Process for $120,000.
E) Debit to Raw Materials for $120,000.
Q2) An unfavorable variance is recorded with a debit.
A)True
B)False
Q3) Which department is often responsible for the direct materials price variance?
A) The accounting department.
B) The production department.
C) The purchasing department.
D) The finance department.
E) The budgeting department.
Q4) A cost variance equals the sum of the quantity variance and the price variance.
A)True
B)False
Q5) What are sales variances? How are they used?
Q6) Define standard costs.How do they assist management?
Page 23
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Chapter 22: Decentralization and Performance Measurement
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Q1) An accounting system that provides information that management can use to evaluate the performance of a department's manager is called a:
A) Cost accounting system.
B) Managerial accounting system.
C) Responsibility accounting system.
D) Financial accounting system.
E) Activity-based accounting system.
Q2) Indirect expenses should be allocated to departments based on the benefits received by each department.
A)True
B)False
Q3) The China Department of the Coulsen Department Store had sales of $282,000,cost of goods sold of $198,750,indirect expenses of $19,875,and direct expenses of $41,250 for the current period.What is the China Department's contribution to overhead as a percentage of sales?
Q4) Contribution to overhead generated by a department is the same as gross profit generated by that department.
A)True
B)False
24
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Chapter 23: Relevant Costing for Managerial Decisions
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Q1) Significant sunk costs are relevant to decisions about the future.
A)True
B)False
Q2) Wages from a job a student gives up to attend summer school would be a sunk cost.
A)True
B)False
Q3) Identify the five steps involved in managerial decision making.
Q4) An opportunity cost is the potential benefit that is lost by taking a specific action when two or more alternative choices are available.
A)True
B)False
Q5) Most financial measures of revenues and costs from accounting systems are based on historical costs.
A)True
B)False
Q6) Contribution margin lost from a decline in sales is an opportunity cost.
A)True
B)False
Q7) Relevant costs are also known as ___________________.
Page 25
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Chapter 24: Capital Budgeting and Investment Analysis
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Q1) Two investments with exactly the same payback periods are always equally valuable to an investor.
A)True
B)False
Q2) Capital budgeting decisions are generally based on:
A) Tentative predictions of future outcomes.
B) Perfect predictions of future outcomes.
C) Results from past outcomes only.
D) Results from current outcomes only.
E) Speculation of interest rates and economic performance only.
Q3) Capital budgeting is the process of analyzing alternative long-term investments and deciding which assets to acquire or sell.
A)True
B)False
Q4) The net present value capital budgeting method considers all estimated cash flows for the project's expected life.
A)True
B)False
Q5) Internal rate of return is expressed as a _________________.
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Chapter 25: Accounting With Special Journals
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Q1) The sales journal is used for recording:
A) Credit purchases
B) Credit sales
C) Cash sales
D) Cash purchases
E) All Sales
Q2) _______________________________________ refers to the programs that help managers direct a company's vital operations.
Q3) Effective accounting information systems will do all of the following except:
A) Collect data from transactions and events.
B) Organize data in useful forms.
C) Communicate information to business decision makers.
D) Process data from transactions and events.
E) Eliminate all errors.
Q4) A special journal is used to record and post transactions of a similar type.
A)True
B)False
Q5) A _______________________________________ is a listing of accounts from the accounts payable ledger with their balances and the sum of all balances.
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Chapter 26: Time Value of Money
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Q1) Sam has a loan that requires a single payment of $4,000 at the end of three years.The loan's interest rate is 6%,compounded semiannually.How much did Sam borrow?
A) $3,358.40
B) $4,000.00
C) $3,660.40
D) $4,776.40
E) $3,350.00
Q2) Future value can be found if the interest rate (i),the number of periods (n),and the present value (p)are known.
A)True
B)False
Q3) Explain the concept of the present value of a single amount.
Q4) A company can use present and future value computations to estimate the interest component of holding assets over time.
A)True
B)False
Q5) Interest is the borrower's payment to the owner of an asset for its use.
A)True
B)False
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Chapter 27: Investments and International Operations
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Q1) A company owns $400,000 of 7% bonds that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end)would be:
A) $4,667
B) $7,000
C) $28,000
D) $14,000
E) $9,333
Q2) A long-term investment is recorded at cost when purchased.
A)True
B)False
Q3) Foreign exchange rates fluctuate due to many factors including changing political and economic conditions.
A)True
B)False
Q4) Explain how available-for-sale debt and equity securities are accounted for at and after acquisition and how they are reported in financial statements.
Q5) Explain how transactions (both sales and purchases)in a foreign currency are recorded and reported.
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Chapter 28: Accounting for Partnerships
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126 Verified Questions
126 Flashcards
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Sample Questions
Q1) During the closing process,each partner's withdrawals account is closed to
Q2) Armstrong plans to leave the FAP Partnership.The recorded value of her capital account is $48,000.The remaining partners,Floyd and Peters,agree to pay Armstrong $40,000 cash.The partners have agreed to share income and loss equally.Prepare the general journal entry to record the withdrawal from the partnership.
Q3) Collins and Farina are forming a partnership.Collins is investing a building that has a market value of $80,000 and a book value of $65,000.However,the building carries a $56,000 mortgage that will be assumed by the partnership.Farina is investing $20,000 cash.Total capital in the partnership will be:
A) $80,000
B) $24,000
C) $56,000
D) $44,000
E) $60,000
Q4) Partner return on equity is calculated as ______________________________.
Q5) When a partner invests in a partnership,his/her capital account is __________ for the invested amount.
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