Accounting for Decision Making Solved
Exam Questions
Course Introduction
Accounting for Decision Making introduces students to the principles and practices of managerial accounting with a focus on how financial information is used to inform organizational decisions. The course covers key concepts such as cost behavior, budgeting, variance analysis, and performance measurement, emphasizing their relevance in planning, controlling, and evaluating business operations. Students will learn to interpret and analyze accounting data, apply decision-making tools, and assess alternative courses of action to support strategic and operational choices in a variety of business contexts. The course aims to develop critical thinking and analytical skills required for effective decision-making in management roles.
Recommended Textbook
Financial Accounting 10th Edition by Walter T. Harrison Available
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Chapter 1: The Financial Statements
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Sample Questions
Q1) The accounting equation can be stated as:
A)Assets + Stockholders' Equity = Liabilities.
B)Assets -Liabilities = Stockholders' Equity.
C)Assets = Liabilities - Stockholders' Equity.
D)Assets - Stockholders' Equity + Liabilities = Zero.
Answer: B
Q2) Shareholders of a corporation:
A)have limited liability for the corporation's debts.
B)have unlimited liability for the corporation's debts.
C)have unlimited liability for the actions of other stockholders.
D)receive dividends from the corporation without having to pay tax on the distribution.
Answer: A
Q3) Notes payable (due in 60 days)would appear on the balance sheet as a:
A)current liability.
B)current asset.
C)long-term asset.
D)long-term liability.
Answer: A
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3
Chapter 2: Transaction Analysis
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Sample Questions
Q1) A company received cash in exchange for issuing stock.This transaction increased assets and:
A)increased expenses.
B)increased revenues.
C)increased liabilities.
D)increased stockholders' equity.
Answer: D
Q2) In a journal entry,the sum of the debits must always equal the sum of the credits.
A)True
B)False
Answer: True
Q3) A multiple-step income statement reports different types of income that include:
A)sales revenue and service revenue.
B)income tax expense,utilities expense,rent expense.
C)gross profit,operating income and net income.
D)cost of goods sold and operating expenses.
Answer: C
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Chapter 3: Accrual Accounting Income
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Sample Questions
Q1) During the closing process,each revenue account is credited for the amount of its balance.
A)True
B)False
Answer: False
Q2) When analyzing a company's current ratio:
A)the current ratio is equal to total current assets divided by total liabilities.
B)most successful businesses operate with current ratios between 0.1 and 0.5.
C)a current ratio of less than 1.00 means that current liabilities exceed current assets.
D)the industry the company is in should not be considered.
Answer: C
Q3) The journal entry to record a cash sale will be the same under the accrual-basis and cash-basis of accounting.
A)True
B)False
Answer: True
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Chapter 4: Internal Control Cash
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Sample Questions
Q1) The bookkeeper recorded a payment on account as $120 instead of the correct amount of $210.What journal entry is required?
A)Debit Accounts Payable for $210 and credit Cash for $210.
B)Debit Accounts Receivable for $210 and credit Cash for $210.
C)Debit Accounts Payable for $90 and credit Cash for $90.
D)Debit Cash for $90 and credit Accounts Payable for $90.
Q2) Debit cards are being used:
A)in place of petty cash funds.
B)for small purchases.
C)for package delivery fees.
D)all of the above.
Q3) An internal control system can be circumvented by:
A)collusion,encryption and management override.
B)collusion,management override and segregation of duties.
C)collusion,management override and human limitations.
D)nothing,if it is a good internal control system.
Q4) The person performing the bank reconciliation should not have any other cash duties.
A)True
B)False
Page 6
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Chapter 5: Short-Term Investments Receivables
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Sample Questions
Q1) On December 1,Macy Company sold merchandise with a selling price of $1,000 on account to Mrs.Jorgensen,with terms 2/10,n/30.On December 3,Mrs.Jorgensen returned merchandise with a selling price of $500.Mrs.Jorgensen paid the amount due on December 9.What journal entry did Macy Company prepare on December 9?
A)Debit Cash for $500 and credit Sales Revenue for $500.
B)Debit Sales Revenue for $500 and credit Cash for $500.
C)Debit Sales Revenue for $500,credit Sales Discount for $10 and credit Cash for $490.
D)Debit Cash for $490,debit Sales Discounts for $10 and credit Accounts Receivable for $500.
Q2) The income statement approach to estimating uncollectible accounts is called the ________ method.The balance sheet approach to estimating uncollectible accounts is called the ________ method.
A)direct write-off; allowance
B)allowance; direct write-off
C)percent-of-sales; aging-of-receivables
D)aging-of-receivables; percent-of-sales
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Chapter 6: Inventory Cost of Goods Sold
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Sample Questions
Q1) In 2015,beginning inventory is overstated.What is the effect of the error on net income in 2015 and 2016?
A)net income is overstated in 2015 and 2016
B)net income is understated in 2015 and 2016
C)net income is understated in 2015 and overstated in 2016
D)net income is understated in 2015 and correctly stated in 2016
Q2) Jaronski Company uses the periodic inventory system.At the end of the accounting period,journal entries are prepared to close out:
A)beginning inventory and ending inventory.
B)purchases only.
C)beginning inventory and purchases.
D)beginning inventory,purchases and ending inventory.
Q3) A company purchased inventory for $800 per unit.The company later sold one unit of the inventory for cash of $1,500.Under the perpetual inventory system,which accounts will be debited to record the sale?
A)Cash,$1,500; Inventory,$800
B)Cash,$1,500; Cost of Goods Sold,$800
C)Cash,$1,500; Cost of Goods Sold,$700
D)Cash,$1,500; Inventory,$700
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Page 8
Chapter 7: Plant Assets,natural Resources, Intangibles
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Sample Questions
Q1) Franco Company sold office furniture for $2,500 cash.The furniture cost $40,000 and had accumulated depreciation through the date of sale totaling $35,000.The company will recognize:
A)a gain of $2,500.
B)a loss of $2,500.
C)a gain of $5,000.
D)a loss of $5,000.
Q2) Return on assets measures:
A)how much the entity earned for each dollar of assets invested.
B)return on sales times total asset turnover.
C)profitability of a company's core business operations.
D)A and B.
Q3) The cost of installing lights in a company's parking lot should be recorded as a cost of:
A)land.
B)land improvements.
C)leasehold improvements.
D)leaseholds.
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Chapter 8: Long-Term Investments: The Time Value of Money
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Sample Questions
Q1) A company has a long-term Investment in Available-for-Sale Securities.The intent is to hold the stock investment for many years,but not until maturity.The investor's percentage ownership is 5%.On January 1,2014,the purchase date,the cost of the stock investment was $100,000.On December 31,2014,the fair value of the investment is $99,000.An allowance account is used to write-down the investment.On January 10,2015,the investor sold the stock for $95,000.What journal entries are required on January 10,2015?
A)debit Allowance to Adjust Investment in Available-for-Sale Securities to Market for $1,000 and credit Unrealized Loss on Investment in Available-for-Sale Securities for $1,000
B)debit Cash for $95,000,debit Loss on Sale of Investment in Available-for-Sale Securities for $5,000 and credit Investment in Available-for-Sale Securities for $100,000
C)debit Cash for $95,000,debit Loss on Sale of Investment of Available-for-Sale Securities for $4,000 and credit Investment in Available-for-Sale Securities for $99,000
D)A and B
Q2) Interest is the cost of using money.
A)True
B)False
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Chapter 9: Liabilities
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Sample Questions
Q1) Lisle Corporation issued $200,000 of 10% bonds on January 1,2014.The bonds pay interest semiannually on January 1 and July 1.The company has a fiscal year end of May 31.On May 31,2014,the Lisle Corporation will:
A)make a journal entry to accrue interest expense from July 1 through December 31.
B)make a journal entry to accrue interest expense from January 1 through July 1
C)make a journal entry to accrue interest expense from January 1 through May 31.
D)make a journal entry to record cash interest paid on May 31.
Q2) The times-interest-earned ratio indicates the company's ability to pay interest expense.
A)True B)False
Q3) Michigan Bank lends Detroit Furniture Company $100,000 on December 1.Detroit Furniture Company signs a $100,000,9%,4-month note.The total cash paid for interest (only)at maturity of the note is:
A)$1,000.
B)$3,000.
C)$6,000.
D)$9,000
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) The Retained Earnings account contains cash for paying dividends to the stockholders.
A)True
B)False
Q2) Which of the following is NOT considered to be an advantage of forming a corporation?
A)Continuous life
B)Government regulations
C)Ability to raise more money
D)Limited liability of owners for corporation's debts
Q3) How does the declaration and payment of cash dividends affect the accounting equation?
A)increase assets and stockholders' equity
B)decrease assets and stockholders' equity
C)increase assets and decrease stockholders' equity
D)decrease assets and increase stockholders' equity
Q4) A credit balance in Retained Earnings indicates that a company's lifetime earnings exceeded its lifetime losses and dividends declared.
A)True
B)False
Page 12
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Income Statement, the Statement of Comprehensive Income
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Sample Questions
Q1) The formula to determine income tax payable is:
A)taxable income (from the income tax return)multiplied by the income tax rate.
B)taxable income(from the income statement)multiplied by the income tax rate.
C)income before income tax expense (from the tax return)multiplied by the income tax rate.
D)income before income tax expense (from the income statement)multiplied by the income tax rate.
Q2) Comprehensive income is:
A)used to determine earnings per share only.
B)used to determine net income only.
C)not used to determine net income or earnings per share.
D)used to determine net income or earnings per share.
Q3) Eastwich Corporation has pretax accounting income of $575,000 and taxable income of $560,000.The company's income tax rate is 30%.The journal entry to record the income tax includes a:
A)debit to Deferred Tax Asset $4,500.
B)credit Income Tax Payable $172,500.
C)credit to Deferred Tax Liability $4,500.
D)debit Income Tax Expense $168,000.
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Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) On a statement of cash flows prepared with the indirect method,financing activities do NOT include:
A)payment of principal amounts of long-term debt.
B)payment of interest on long-term debt.
C)payment of dividends.
D)sale of treasury stock.
Q2) When preparing the statement of cash flows using the indirect method,which statement is FALSE?
A)Gains on the sale of long-term assets are subtracted from net income.
B)Losses on the sale of long-term assets are subtracted from net income.
C)Depreciation expense is added to net income.
D)Increases in current liabilities are added to net income.
Q3) Newsome Corporation had accounts receivable of $110,000 at the beginning of the year and $125,000 at the end of the year.Sales for the year amounted to $575,000.Cash collections from customers are:
A)$15,000.
B)$465,000.
C)$560,000.
D)$575,000.
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Page 14
Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) On a statement of cash flows(indirect method),an increase or decrease in inventory is considered:
A)an operating activity.
B)an investing activity.
C)a financing activity.
D)an noncash investing or financing activity.
Q2) The primary focus of horizontal analysis is:
A)percentage changes in line items from comparative financial statements.
B)the balance sheet only.
C)the amount of individual financial statement line items as a percentage of some related total,such as total assets.
D)the income statement only.
Q3) Red flags in financial statement analysis can include all of the following EXCEPT:
A)a debt ratio higher than average.
B)a slowdown in inventory turnover.
C)days' sales in receivables increasing.
D)Net Cash Provided by Operating Activities exceeds net income.
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