Accounting for Decision Making Review Questions
Course Introduction
Accounting for Decision Making introduces students to the fundamental principles of accounting with an emphasis on using financial information to support managerial decision making. The course covers key topics such as financial statement analysis, budgeting, cost-volume-profit analysis, and performance measurement. Students learn how to interpret and utilize accounting data to make informed business decisions, evaluate organizational performance, and plan for future growth. By applying practical tools and techniques, students develop the analytical skills necessary to assess various scenarios and contribute to effective strategic planning within organizations.
Recommended Textbook
Financial Accounting 9th Edition by Walter T. Harrison
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13 Chapters
2240 Verified Questions
2240 Flashcards
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Page 2
Chapter 1: The Financial Statements
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) The income statement measures operating performance.
A)True
B)False
Answer: True
Q2) The owners' equity of any business is its:
A) revenues minus expenses.
B) assets minus liabilities.
C) assets plus liabilities.
D) paid-in capital plus assets.
Answer: B
Q3) On the income statement:
A) the top line is net income.
B) all expenses must have the word "expenses" in their title.
C) gains and liabilities are reported.
D) amounts can be reported in millions of dollars to reduce clutter.
Answer: D
Q4) All financial statements are as of a specific date.
A)True
B)False
Answer: False
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Chapter 2: Transaction Analysis
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179 Flashcards
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Sample Questions
Q1) Transactions:
A) must be recorded for every company event.
B) provide objective information about the financial impact on a company.
C) are recorded only if the amounts are significant to the company.
D) only have one side that needs to be recorded.
Answer: B
Q2) When a company pays an amount it owes a creditor:
A) assets are decreased and net income is decreased.
B) assets are decreased and liabilities are increased.
C) liabilities are decreased and net income is increased.
D) assets are decreased and liabilities are decreased.
Answer: D
Q3) Which error will be uncovered by a trial balance?
A) The bookkeeper recorded the same journal entry three times.
B) The bookkeeper forgot to record a journal entry for a large amount.
C) The bookkeeper recorded both the debit and credit of a journal entry as $200 instead of $700.
D) The bookkeeper recorded a journal entry with a debit of $400 and a credit of $930.
Answer: D
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Page 4
Chapter 3: Accrual Accounting Income
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205 Flashcards
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Sample Questions
Q1) Revenues and expenses affect stockholders' equity; therefore, net income is then transferred to:
A) the income statement.
B) retained earnings.
C) the balance sheet.
D) none of the above.
Answer: B
Q2) The financial statements are prepared from the:
A) adjustments.
B) unadjusted trial balance.
C) ledger.
D) adjusted trial balance.
Answer: D
Q3) The net income or loss is calculated on which financial statement?
A) Statement of retained earnings
B) Income statement
C) Balance sheet
D) Dividends statement
Answer: B
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Page 5
Chapter 4: Internal Control Cash
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173 Flashcards
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Sample Questions
Q1) Internal control is so critical to a company that Congress passed the:
A) Sarbanes-Oxley Act of 2002.
B) Kemp-Oxley Act of 2002.
C) Economic Stimulus Law of 2010.
D) Public Company Accounting Oversight Board Act of 2002.
Q2) Which is NOT an objective of an internal control system?
A) Safeguarding of assets
B) Compliance with company policies
C) Compliance with legal requirements
D) Risk minimization
Q3) For good internal control:
A) the purchasing agent should also receive the goods.
B) the purchasing agent should also approve the invoice for payment.
C) the purchasing agent should not receive the goods or approve the invoice.
D) the purchasing agent should not order the goods.
Q4) Another term for a "hot check" is:
A) electronic check.
B) outstanding check.
C) nonsufficient funds (NSF) check.
D) cleared checks.
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Chapter 5: Short-Term Investments Receivables
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201 Flashcards
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Sample Questions
Q1) To shorten the collection period, a company may:
A) decide to stop accepting credit cards.
B) stop charging interest on late payments.
C) decrease the discount offered.
D) factor its receivables.
Q2) The maturity value of a note is the sum of the principal amount of a note less the interest due at maturity.
A)True
B)False
Q3) The purpose of owning trading securities is to:
A) increase cash reserves.
B) hold the investment for at least one year.
C) sell the investment for more than its cost.
D) sell the investment to decrease net income.
Q4) The amount of revenue to be recognized is the cash value of the goods or services transferred from the seller to the buyer.
A)True
B)False
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Chapter 6: Inventory Cost of Goods Sold
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Sample Questions
Q1) When comparing the FIFO and LIFO inventory methods:
A) LIFO values inventory at the newest costs.
B) LIFO reports the most up-to-date inventory cost on the balance sheet.
C) FIFO results in the most realistic net income figure.
D) FIFO matches old inventory costs against revenue.
Q2) Under the disclosure principle, the inventory accounting method must be described in the footnotes.
A)True
B)False
Q3) The disclosure principle states that a company should report ________ and ________ information about itself.
A) material, relevant
B) important, conservative
C) representational faithful, financial
D) relevant, representational faithful
Q4) Without knowledge of the accounting method a company uses to value its inventory, a banker could make an unwise lending decision.
A)True
B)False
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Chapter 7: Plant Assets, Natural Resources, Intangibles
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Sample Questions
Q1) At the end of an asset's useful life, the balance in accumulated depreciation will be the same as the:
A) tax liability.
B) book value.
C) salvage value.
D) cumulative depreciation expense.
Q2) Which of the following costs should NOT be added to the cost of the machine?
A) The cost of transporting the machine to its setup location
B) The cost of insurance for the machine while it is in-transit
C) The cost of a special platform for the machine
D) The cost of oiling the machine after it has been used for two years
Q3) Pat's Pets recently paid to have the engine in its delivery van overhauled. The estimated useful life of the van was originally estimated to be 4 years. The overhaul is expected to extend the useful life of the van to 10 years. The overhaul is regarded as a(n):
A) revenue expenditure.
B) capital expenditure.
C) equity expenditure.
D) matching expenditure.
Q4) Determine the cost of the dump truck, based upon the following data:
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Chapter 8: Long-Term Investments the Time Value of Money
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Sample Questions
Q1) Which of the following is the method used when one company owns less than 20% of the shares of another company?
A) Consolidation method.
B) Market value method.
C) Equity method.
D) Minority Interest method.
Q2) Carmel Corporation purchased 5% bonds for $42,000 on January 1, 2012. On July 1, 2012, Carmel received cash interest of $1,050. The journal entry to record the receipt of interest on July 1 would include a:
A) debit to Cash $1,050.
B) debit to Long-Term Investment in Bonds $42,000.
C) credit to Interest Receivable $1,050.
D) credit to Interest Receivable $42,000.
Q3) On the statement of cash flows, the cash paid for 40% of a corporation to be accounted for under the equity method is shown as a(n):
A) increase in financing activities.
B) decrease in financing activities.
C) increase in investing activities.
D) decrease in investing activities.
Page 10
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Chapter 9: Liabilities
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Sample Questions
Q1) On January 1, Hudson Corporation issues $500,000, 8%, 5-year bonds at 106. Assuming the straight-line amortization method is used and interest is paid annually, how much bond interest expense is recorded on the next interest date?
A) $6,000
B) $34,000
C) $46,000
D) $40,000
Q2) Potential liabilities that depend on future events arising out of past events are called:
A) long-term liabilities.
B) estimated liabilities.
C) contingent liabilities.
D) current liabilities.
Q3) Bonds that are secured by real estate are called:
A) term bonds.
B) serial bonds.
C) mortgage bonds.
D) debentures.
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) In general, the order of reporting stockholders' equity on the balance sheet is:
A) Common Stock, Preferred Stock, Paid-in Capital, Retained Earnings, Treasury Stock.
B) Preferred Stock, Common Stock, Treasury Stock, Paid-in Capital, Retained Earnings.
C) Preferred Stock, Common Stock, Paid-in Capital, Retained Earnings, Treasury Stock.
D) Retained Earnings, Preferred Stock, Common Stock, Paid-in Capital, Treasury Stock.
Q2) Stock dividends distributed appear in which, if any, sections of the statement of cash flows?
A) Do not appear anywhere in the statement of cash flows
B) Operating activities section
C) Financing activities section
D) Investing activities section
Q3) The payment of dividends will appear on the statement of cash flows as a:
A) positive amount in the investing activities section.
B) negative amount in the investing activities section.
C) positive amount in the financing activities section.
D) negative amount in the financing activities section.
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Page 12
Chapter
Income, the Statement of Stockholders
Equity
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Sample Questions
Q1) Earnings per share (EPS) is calculated as:
A) the number of shares of common stock outstanding at the end of the year divided by net income.
B) net income divided by the number of shares of common stock outstanding at the end of the year.
C) net income divided by the average number of shares of common stock outstanding throughout the year.
D) the average number of shares of common stock outstanding throughout the year divided by net income.
Q2) A correction in income of a prior-period requires a debit to the Retained Earnings account.
A)True
B)False
Q3) Earnings per share is calculated:
A) only for preferred stock.
B) only for common stock.
C) for common and preferred stock.
D) only for treasury stock.
Page 13
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Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) Cash receipts from interest and dividends are classified as:
A) operating activities.
B) investing activities.
C) financing activities.
D) noncash activities.
Q2) Plymouth Corporation reported an increase in inventory of $75,000. The cost of goods sold for the year was $180,000. There was also a $7,000 decrease in accounts payable from the beginning of the year to the end of the year. What were Plymouth's cash payments to suppliers?
A) $262,000
B) $248,000
C) $255,000
D) $187,000
Q3) Which of the three types of activities reported on the statement of cash flows is the most critical?
A) Investing activities
B) Operating activities
C) Financing activities
D) Investing and financing activities
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Page 14
Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Matrix analysis expresses each item on a financial statement in terms of a percent of a base amount.
A)True
B)False
Q2) When computing trend percentages:
A) the current year is always equal to 100%.
B) the base year is always the latest year.
C) the base year is always equal to 100%.
D) the base year is equal to the current year plus the previous year divided by two.
Q3) When comparing companies of different sizes, vertical analysis would be a useful tool.
A)True
B)False
Q4) The ratio that provides an estimate of the number of days, on average, that it takes for customers to pay their account is the:
A) days' sales in receivables
B) current ratio.
C) accounts receivable turnover.
D) acid-test ratio.
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