Accounting for Decision Making Practice Questions
Course Introduction
Accounting for Decision Making introduces students to the fundamental concepts and principles of accounting with a focus on how financial information supports managerial decisions. The course explores the preparation and interpretation of financial statements, budgeting, cost analysis, and performance measurement. Emphasizing real-world applications, students learn how to use accounting data to evaluate business scenarios, assess organizational performance, and make strategic decisions that drive value. The course is designed for students from diverse backgrounds and does not require prior accounting experience, making it suitable for future managers, entrepreneurs, and anyone involved in business decision-making processes.
Recommended Textbook
Financial Managerial Accounting 16th Edition by Jan Williams
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Chapter 1: Accounting: Information for Decision Making
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Q1) An accounting practice can become a "generally accepted accounting principle" through widespread use, even if the practice is not mentioned in the official pronouncements of the accounting standard-setting organizations.
A)True
B)False
Answer: True
Q2) Generally accepted accounting principles:
A) Are based on official decrees only.
B) Are based on tradition only.
C) Are based on an accountant's experience only.
D) May change over time.
Answer: D
Q3) The Securities and Exchange Commission is instrumental in the development of financial accounting standards.
A)True
B)False
Answer: True
Q4) The information is summarized in a set of statements distributed to the public. Answer: Financial
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Chapter 2: Basic Financial Statements
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Sample Questions
Q1) A transaction caused a $60,000 increase in both assets and total liabilities. This transaction could have been which of the following?
A) Purchase of office equipment for $60,000 cash.
B) Purchase of office equipment for $120,000, paying $60,000 cash and issuing a note payable for the balance.
C) Repayment of a $60,000 bank loan.
D) Investment of $60,000 cash in the business by the owner.
Answer: B
Q2) The accounting equation may be stated as "assets minus liabilities equals owners' equity."
A)True
B)False
Answer: True
Q3) An accounting entity may best be described as:
A) An individual.
B) A particular economic unit.
C) A publicly owned corporation.
D) Any corporation, regardless of size.
Answer: B
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Page 4
Chapter 3: The Accounting Cycle: Capturing Economic Events
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Sample Questions
Q1) A trial balance that balances provides proof that all transactions were correctly journalized and posted to the ledger.
A)True
B)False
Answer: False
Q2) In a trial balance prepared for Wilson Trucking on January 1, 2012, the total of the credit column is:
A) $1,580,000.
B) $1,560,000.
C) $1,620,000.
D) $3,120,000.
Answer: B
Q3) Every transaction which affects an income statement account also affects a balance sheet account.
A)True
B)False
Answer: True
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Page 5
Chapter 4: The Accounting Cycle: Accruals and Deferrals
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Sample Questions
Q1) On June 1, 2008, the park purchased a 12-month insurance policy. Give the adjusting entry to record insurance coverage expiring in January. (Hint: The company adjusts its books on a monthly basis.)
Q2) Which of the following accounting principles is concerned with offsetting revenue with the expenses incurred in producing that revenue?
A) Realization principle.
B) Materiality.
C) Matching.
D) Depreciation.
Q3) Adjusting entries are prepared:
A) Before financial statements and after a trial balance has been prepared.
B) After a trial balance has been prepared and after financial statements are prepared.
C) After posting but before a trial balance is prepared.
D) Anytime an accountant sees fit to prepare the entries.
Q4) The adjusted trial balance combines the trial balance items with the adjusting entries to determine the adjusted balances.
A)True
B)False
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Chapter 5: The Accounting Cycle: Reporting Financial
Results
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Q1) If current assets are $110,000 and current liabilities are $50,000, working capital will be:
A) 45.5%.
B) 2:2.
C) $60,000.
D) $160,000.
Q2) The following information is available: What is the return on equity? (round to the nearest number)
A) 5%.
B) 15%.
C) 20%.
D) 25%.
Q3) The amount of net income (or loss) will appear on the debit side of the Income Statement columns in a worksheet if:
A) Revenue exceeds total expenses for the period.
B) The trial balance is out of balance.
C) Dividends are more than the income or loss for the period.
D) There is a net loss for the period.
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Chapter 6: Merchandising Activities
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Q1) The purchasing agent of Superb Service Co. wants to know the dollar amount of inventory purchased on account during the year from a particular supplier. This information can be found most easily in Superb Service's:
A) Inventory subsidiary ledger.
B) Accounts payable controlling account.
C) Inventory controlling account.
D) Accounts payable subsidiary ledger.
Q2) Parkside Pool reports net sales of $625,000, gross profit of $275,000, and net income of $15,000. The company's cost of goods sold is:
A) $335,000.
B) $350,000.
C) $340,000.
D) $325,000.
Q3) Which of the following factors would suggest the use of a perpetual inventory system?
A) A small company.
B) A high volume of many different, low-cost items.
C) A desire to minimize record-keeping requirements.
D) Only annual reporting is required.
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Page 8
Chapter 7: Financial Assets
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Q1) The aging of the accounts receivable approach to estimating uncollectible accounts does not:
A) Take into consideration the existing balance in the Allowance for Doubtful Accounts.
B) Utilize a percentage of probable uncollectible accounts for each age group of accounts receivable.
C) Stress the relationship between uncollectible accounts expense and net sales.
D) Tend to give a reliable estimate of uncollectible accounts because of the consideration given to the collectability of specific accounts receivable.
Q2) Cash equivalents:
A) Include amounts of cash available through an unused line of credit.
B) Are investments in the publicly traded stocks and bonds of large corporations.
C) Are usually included in the term "cash" in the balance sheet and the statement of cash flows.
D) Is another term for financial assets.
Q3) Financial assets may be current or long-term assets.
A)True
B)False
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Chapter 8: Inventories and the Cost of Goods Sold
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Sample Questions
Q1) The inventory turnover rate provides an indication of how quickly the average quantity of inventory on hand:
A) Spoils.
B) Sells.
C) Increases.
D) Converts into cash.
Q2) If the beginning inventory of the current year and the ending inventory of the past year were overstated by the same amount:
A) Retained earnings at the end of the current year would be correct.
B) Retained earnings at the end of the current year would be overstated.
C) Retained earnings at the end of the current year would be understated.
D) Net income for the current year would be correct.
Q3) Which of the four inventory cost flow assumptions transfers the most recent purchase cost to the cost of goods sold and the remaining items in inventory are valued at the oldest acquisition costs?
A) LIFO.
B) FIFO.
C) Average.
D) Specific identification.
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Page 10
Chapter 9: Plant and Intangible Assets
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Sample Questions
Q1) Land is purchased for $256,000. Additional costs include a $15,300 fee to a broker, a survey fee of $2,400, $1,750 to construct a fence, and a legal fee of $8,500. What is the cost of the land?
A) $256,000.
B) $281,000.
C) $284,600.
D) $282,200.
Q2) The gain or loss on the disposal of a depreciable asset reported in financial statements often differs from that reported for income tax purposes. The principal reason for the difference is:
A) The cost of the asset is different for financial reporting and income tax purposes.
B) The sales price of the asset is different for financial reporting and income tax purposes.
C) Different depreciation methods have been used in financial statements and in income tax returns.
D) The company has made an error because the same amount of gain or loss should appear in the income tax return as in the financial statements.
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Chapter 10: Liabilities
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Sample Questions
Q1) A capital lease is recorded in the accounting records of the lessee by an entry:
A) Debiting Rent Expense and crediting Cash each time a lease payment is made.
B) Debiting Cash and crediting Rental Revenue each time a lease payment is received.
C) Debiting an asset account and crediting a liability account for the present value of the future lease payments.
D) Debiting an asset account and crediting Sales for the present value of the future lease payments.
Q2) The basic measure of the amount of leverage being applied within the capital structure of an organization is the:
A) Interest coverage ratio.
B) Debt ratio.
C) Return on assets.
D) Return on equity.
Q3) Bonds payable are a means of dividing a very large, long-term liability among many creditors, some of whom may participate in the loan only for a short period of time.
A)True
B)False
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Chapter 11: Stockholders Equity: Paid-In Capital
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Q1) Refer to the information above. If Vision did not pay a dividend for the last two years, but declared a dividend this year, how much will they have to declare in order for the common stockholders to receive $.45 per share?
A) $189,000.
B) $306,000.
C) $108,000.
D) $162,000.
Q2) Most preferred stocks have the following characteristics, except:
A) To receive dividends on a preferred basis.
B) Cumulative dividends.
C) Voting rights.
D) Callable at the option of the corporation.
Q3) Refer to the information above. If Vision paid a total of $55,800 in dividends, how much would each common stockholder receive for each share of stock owned?
(Assume there are no dividends in arrears)
A) $0.12.
B) $0.24.
C) $0.06.
D) $0.18.
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Page 13
Chapter 12: Income and Changes in Retained Earnings
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Sample Questions
Q1) Assume that all remaining treasury stock is reissued at a price of $18 per share in January of 2010. What amount should be credited to the account Additional Paid-in Capital: Treasury Stock Transactions in the journal entry to record this transaction?
A) $96,000.
B) $140,000.
C) $112,000.
D) $288,000.
Q2) Which of the following would be treated as a prior period adjustment by Gold Corporation in 2010?
A) In 2010, it was discovered that Gold Corporation recorded the purchase of a warehouse in 2007 as a debit to Repairs Expense.
B) In 2010, Gold Corporation switched from the straight-line method of depreciation to another method of computing depreciation.
C) In 2010, Gold Corporation's management decided that the estimated useful life of its computer equipment should be changed from five years to nine years.
D) In 2010, Gold Corporation sold a segment of the business that it has operated since 1996.
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Page 14
Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) The cash proceeds received by Kenny Corporation in 2010 for the sale of marketable securities was:
A) $230,000.
B) $280,000.
C) $195,000.
D) $180,000.
Q2) The operating activities section of the cash flow statement includes the cash effects of those transactions reported on the income statement.
A)True
B)False
Q3) Companies that show profits on the income statement will always show positive cash flows from operating activities.
A)True
B)False
Q4) Compute the amount of Seldin's cash payments for operating expenses.
A) $73,000.
B) $59,000.
C) $81,000.
D) $65,000.
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) The gross profit rate for the year (rounded to the nearest 1 percent) was:
A) 46%.
B) 54%.
C) 69%.
D) Some other answer.
Q2) The measures most often used in evaluating solvency-the current ratio, quick ratio, and amount of working capital-are developed from amounts appearing in the:
A) Balance sheet.
B) Income statement.
C) Statement of retained earnings.
D) Statement of cash flows.
Q3) A company should carry the amount of working capital necessary to conduct operations, not necessarily maximize its working capital.
A)True
B)False
Q4) A company's liquidity refers to its ability to remain profitable.
A)True
B)False
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Page 16
Chapter 15: Global Business and Accounting
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Sample Questions
Q1) Establishing international accounting standards is the responsibility of:
A) Securities and Exchange Commission.
B) International Accounting Standards Board.
C) Financial Accounting Standards Board.
D) Accounting Association of America.
Q2) An international joint venture involves the creation of a new company that is owned by two or more firms from different countries.
A)True
B)False
Q3) The number of dollars equivalent to \(\le\) 50,000 on this date is:
A) 31,250.
B) 80,000.
C) 32,500.
D) Depends upon whether the item is a receivable or a payable.
Q4) The price of one currency stated in terms of another currency is the:
A) Current ratio.
B) Exchange rate.
C) Facilitating payment.
D) International clearing price.
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Chapter 16: Management Accounting: a Business Partner
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Sample Questions
Q1) Total manufacturing costs charged (debited) to Work in Process during September amount to:
A) $180,000.
B) $170,000.
C) $172,000.
D) Some other amount.
Q2) If the salaries of the sales staff of a manufacturing company are improperly recorded as a product cost, what will be the likely effect on net income of the period in which the error occurs?
A) Net income will be overstated.
B) Net income will be understated.
C) Net income will be unaffected.
D) Net income will be understated only if inventory levels rise.
Q3) The following information is available about the August transactions of the Helpful Tool Company: The product costs to be deducted from revenue in August amount to:
A) $493,000.
B) $737,000.
C) $718,000.
D) $739,000.
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Page 18
Chapter 17: Job Order Cost Systems and Overhead
Allocations
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Q1) Doyle Co. uses a job order cost accounting system. At year-end the Work-in-Process Inventory controlling account showed a debit balance of $43,125. For the two jobs in process at year-end, one showed $6,000 in direct materials and $4,500 in direct labor. The job cost sheet for the second job showed $9,000 in direct materials and $6,750 in direct labor. If the company is using a predetermined overhead application rate based on direct labor cost, the rate is:
A) 50%.
B) 100%.
C) 150%.
D) 200%.
Q2) In a job cost system, the Work-in-Process Inventory controlling account may be reconciled to the total of the:
A) Employee time cards.
B) Materials requisitions.
C) Work-in-Process Inventory records for each department or process.
D) Job cost sheets.
Q3) Pepsi Cola would most likely use a job order costing system.
A)True
B)False
Page 19
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Chapter 18: Process Costing
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Q1) Which of the following is not a characteristic of a process costing system?
A) The costs incurred in each process are accumulated in separate Work-in-Process Inventory accounts.
B) It is suitable for mass-produced operations.
C) Costs are accumulated separately for each unit of production as it moves through the factory.
D) The cost of a finished unit is the sum of the unit costs of performing each manufacturing process.
Q2) If 80% of all inventory was sold at $32 per unit and 3,500 units were sold, what is the cost of the finished goods inventory at year-end?
A) $16,800.
B) $77,000.
C) $19,250.
D) $96,250.
Q3) The unit cost per case of mustard incurred by the Bottling Department in May was $__________.
Q4) Direct materials and overhead may also be referred to as conversion costs.
A)True B)False
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Chapter 19: Costing and the Value Chain
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Q1) Quality costs do not include:
A) Costs to prevent poor quality from occurring.
B) Costs of appraising and inspecting the product.
C) Costs to correct problems before the customer receives the goods.
D) Advertising costs.
Q2) An effective just-in-time system will include:
A) Specialized employees.
B) An efficient plant layout.
C) Sizable inventories of raw materials.
D) Many suppliers.
Q3) Which activities might be reduced or eliminated should Efficient implement a JIT system?
Q4) What are the total internal failure costs for the Abrams Corporation?
A) $38,300.
B) $34,500.
C) $19,700.
D) $35,250.
Q5) A just-in-time manufacturing system is also known as a supply push system.
A)True
B)False
21
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Chapter 20: Cost-Volume-Profit Analysis
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Q1) At the reduced selling price of $65 per unit, the contribution margin ratio is (rounded, if necessary):
A) 43.1%.
B) 56.9%.
C) 52.8%.
D) Some other percentage.
Q2) The Gillett company's breakeven point in units is 25,000. Assuming that variable costs are 50% and fixed costs are $500,000, what is the company's projected operating income if sales are $1,250,000?
A) $750,000.
B) $100,000.
C) $125,000.
D) $400,000.
Q3) A semi-variable cost:
A) Increases and decreases directly and proportionately with changes in volume.
B) Changes in response to a change in volume, but not proportionately.
C) Increases if volume increases, but remains constant if volume decreases.
D) Changes inversely in response to a change in volume.
Q4) Relevant range
What is meant by the phrase relevant range of activity?
Page 22
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Chapter 21: Incremental Analysis
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Q1) The net change in operating income resulting from a decision to manufacture product A2 is:
A) $15,000 (increase).
B) $15,000 (decrease).
C) $5,000 (increase).
D) $45,000 (increase).
Q2) Which of the following costs is generally considered irrelevant in incremental analysis?
A) Sunk costs.
B) Out-of-pocket costs.
C) Incremental costs.
D) Opportunity costs.
Q3) An opportunity cost is a relevant cost when making a business decision.
A)True
B)False
Q4) Joint products are similar products that serve the same exact function.
A)True
B)False
Q5) Joint costs allocated to product MB total: $_____________
Q6) Joint costs allocated to product EB total: $_____________
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Chapter 22: Responsibility Accounting and Transfer Pricing
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Q1) In preparing an income statement that measures contribution margin and responsibility margin for a responsibility center, two concepts are applied in classifying costs. One is whether the costs are variable or fixed. The other is whether the costs are:
A) Product costs or period costs.
B) Traceable to the responsibility center.
C) Under the control of the manager.
D) Transfer prices.
Q2) Increase in responsibility margin that would be expected to result from a 10% increase in sales volume. $_____________
Q3) A responsibility income statement generally does not show the:
A) Contribution margin of each responsibility center.
B) Traceable fixed costs allocated to each responsibility center.
C) Segment margin of each responsibility center.
D) Net income of each responsibility center.
Q4) Refer to the above information. The contribution margin of the local branch is:
A) $5,500,000
B) $2,400,000.
C) $2,246,000.
D) $3,254,000.
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Chapter 23: Operational Budgeting
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Q1) If the volume of output of a factory for the month of June is 50,000 units, while the budgeted output was 40,000 units:
A) Comparison of budgeted results and actual results will be misleading unless the company uses a flexible budget.
B) Actual fixed costs per unit may be expected to exceed budgeted levels.
C) Actual cost per unit will be higher than standard cost per unit.
D) Both total production costs and unit production costs should be approximately 25% above budgeted levels.
Q2) The cost-volume relationship used to prepare Skelton's flexible budget for various production levels includes:
A) Fixed cost of $1.17 per unit.
B) Manufacturing overhead costs of $1.43 per unit.
C) Variable costs of $2.07 per unit.
D) Total cost of $3.05 per unit.
Q3) Explain what is meant by "profit rich, yet cash poor".
Q4) A master budget actually includes a number of related budgets.
A)True
B)False
Q5) Discuss the benefits that a company may derive from a formal budgeting process.
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Chapter 24: Standard Cost Systems
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Q1) The overhead volume variance for the month in question was:
A) $250 unfavorable.
B) $1,125 favorable.
C) $3,375 favorable.
D) $1,125 unfavorable.
Q2) With respect to materials costs, the supervisor of the Production Department should be held responsible for:
A) A favorable cost variance of $520.
B) A favorable cost variance of $990.
C) An unfavorable cost variance of $550.
D) An unfavorable cost variance of $490.
Q3) A large favorable variance from standard costs at the end of the year should be:
A) Carried forward to the next fiscal year.
B) Shown as other income in the income statement.
C) Added to cost of goods sold in the income statement.
D) Allocated between ending inventories and cost of goods sold.
Q4) It is possible for the overhead volume variance to be favorable and the overhead spending variance to be unfavorable.
A)True
B)False
Page 26
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Chapter 25: Rewarding Business Performance
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Q1) Which of the following is not a reason for using a measure such as ROI?
A) To motivate employees to act in accordance with the goals of the organization.
B) To motivate employees towards short-term planning rather than long-term planning.
C) To motivate employees to accept a project that would benefit their own division but not necessarily the firm as a whole.
D) To motivate employees to act solely on their own best interest.
Q2) What is division's Y ROI for product A?
A) 12.0%.
B) 10.0%.
C) 11.0%.
D) 12.5%.
Q3) Stock based performance evaluation of managers is considered more risky than accounting based performance evaluation.
A)True
B)False
Q4) Explain the importance of incentive systems for motivating performance.
Q5) Calculate and explain residual income and economic value added.
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Chapter 26: Capital Budgeting
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Q1) The payback period for this investment is:
A) 8 years.
B) 4 years.
C) Over 13 years.
D) 2.5 years.
Q2) On the basis of the above data, which of the following is false?
A) Proposal A should be considered unacceptable.
B) Proposal C is the best alternative because it has the shortest payback period, which is the most meaningful of the capital budgeting statistics.
C) Proposal A's negative net present value indicates that this alternative will not generate management's required rate of return.
D) Although proposals B and C are each acceptable, proposal B is a better investment considering the time value of money.
Q3) The return on average investment method of evaluating investment proposals takes into consideration both the amount and the timing of future cash flows.
A)True
B)False
Q4) Payback period: ____________ years
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Chapter 28: Forms of Business Organization
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Q1) Shareholders report and pay income tax on dividends received from a corporation.
A)True
B)False
Q2) Sally Smythe enters into a partnership by contributing the following: Cash $15,000; Accounts Receivable $4,500; Machinery which cost $3,000 and has a fair market value of $2,125; and accounts payable of $1,200. What amount will be recorded in her capital account?
A) $21,625.
B) $20,425.
C) $22,500.
D) $21,300.
Q3) The Board of Directors of a corporation:
A) Are not responsible for hiring other professional managers.
B) Do not decide whether profits will be distributed to stockholders.
C) Make major policy decisions.
D) Are members of a government agency.
Q4) The entry to record the issuance of 100 shares of capital stock in exchange for $1,000 cash includes a debit to Capital Stock.
A)True
B)False
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Chapter 27: The Time Value of Money: Future Amounts and
Present Values Answer Key
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/78576
Sample Questions
Q1) If you receive $20,000 as a gift and invest it at 12% compounded quarterly, how much will you have at the end of three years?
A) $32,020.60.
B) $28,515.20.
C) $22,497.20.
D) $14,027.60.
Q2) Financial instruments do not include:
A) Contracts that call for receipts or payment of cash.
B) Equity investment in another business.
C) Cash.
D) Tangible assets.
Q3) Joan is 75 years old and wishes to retire. She needs to have $48,000 a year plus her social security to live in the style she is accustomed to. She would like to have enough money in her retirement account which earns 5% compounded annually to support her for the next 15 years. How much must be in the fund if she takes the first payment at year-end?
Q4) Powers Company wishes to issue $2,000,000 of 8%, 10 year bonds which pay interest semi-annually. The current discount rate is 6%. What amount should the bonds sell for?
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