Accounting for Decision Making Study Guide Questions
Course Introduction
Accounting for Decision Making introduces students to the fundamental concepts and techniques of accounting as they apply to managerial planning, control, and decision making. The course emphasizes the use of accounting information in strategic and operational decision processes, focusing on topics such as cost behavior, cost-volume-profit analysis, budgeting, performance evaluation, and relevant costing. Through real-world case studies and practical exercises, students learn how to interpret financial data to support effective management decisions and drive organizational success.
Recommended Textbook
Introduction to Financial Accounting 11th Edition by Charles T. Horngren
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12 Chapters
1592 Verified Questions
1592 Flashcards
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Page 2
Chapter 1: Accounting: the Language of Business
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) The annual report is a document prepared by the board of directors and distributed to current and potential investors.
A)True
B)False
Answer: False
Q2) Buying on credit creates an account receivable.
A)True
B)False
Answer: False
Q3) An entity
A)is a separate economic unit.
B)allows a section of an organization to be a separate economic unit.
C)helps accountants relate events to a defined area of accounting.
D)All of the above
E)None of the above
Answer: D
Q4) The balance sheet equation is assets = liabilities - owner's equity.
A)True
B)False
Answer: False
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Chapter 2: Measuring Income to Assess Performance
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Sample Questions
Q1) Frequently,the statement of retained earnings is added to the bottom of the balance sheet.
A)True
B)False
Answer: False
Q2) Ace Office Equipment is an office equipment company specializing in sales of printers,scanners,and copiers.When should Ace Office Equipment recognize revenue from its sales?
A)When the customer calls to accept delivery of a new copier
B)When the customer signs a contract to buy a copier
C)When the copier is delivered to the customer
D)When the payment is received from the customer
E)When the financial statements are prepared that includes this sale
Answer: C
Q3) Reliability refers to whether the information makes a difference to the decision maker.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Recording Transactions
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Sample
Questions
Q1) Which of the following statements is true regarding attributes of the general ledger and the general journal?
A)Both the general ledger and the general journal focus on general accounting concepts and not specific events or occurrences.
B)The general journal displays the balance in a particular account.
C)The general ledger and the general journal are separate and distinct accounting records that are not related or cross-referenced to each other.
D)The general ledger is account driven and the general journal is transaction driven.
E)General ledger accounts are only used in ERP systems.
Answer: D
Q2) A debit increases the balance of assets and liabilities.
A)True
B)False
Answer: False
Q3) Over time,the cost of processing accounting information has increased.
A)True
B)False
Answer: False
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Chapter 4: Accrual Accounting and Financial Statements
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Sample Questions
Q1) Scrumptious Donuts sold $2,000 worth of gift certificates in December.As of December 31,$500 worth of the $2,000 gift certificates had been redeemed.All gift certificates sold use the Deferred Revenue account.The balance in the Deferred Revenue account as of December 31 is
A)$2,000
B)$2,500
C)$500
D)$1,500
E)not enough information to answer
Q2) Current assets are cash plus those assets that are expected to be converted to cash or sold or consumed during the next 12 months or within the normal operating cycle if longer than a year.
A)True
B)False
Q3) The return on assets ratio measures
A)how effectively assets generate profits.
B)how effectively assets generate stockholders equity.
C)the relationship of total assets to current assets.
D)the relationship of total assets to total liabilities.
E)a company's ability to generate sales.
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Chapter 5: Statement of Cash Flows
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Sample Questions
Q1) Referring to Exhibit 5-1,how much inventory did Cartell Paper Products purchase in 2012?
A)$81,300
B)$63,800
C)$64,900
D)$46,300
E)$62,700
Q2) A statement of cash flows reports cash inflows and cash outflows on a particular day.
A)True
B)False
Q3) All of the following would be included in a company's investing activities except A)purchase of land.
B)payment of dividends.
C)collection of loan repayments.
D)purchase of equipment.
E)purchase of another company's stock.
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Chapter 6: Accounting for Sales
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Sample Questions
Q1) The credit terms 2/4,n/30 means that the customers may take a 4% cash discount if they pay within 30 days.
A)True
B)False
Q2) The accounts receivable subsidiary ledger
A)is not effected by the write-off of individual accounts.
B)provides the supporting detail (i.e.,individual customer names and amounts owed)for the general ledger account "Accounts Receivable."
C)is kept for both the "Accounts Receivable" and the "Allowance for Uncollectible Accounts" accounts.
D)is only kept by companies that use the allowance method of estimating bad debts.
E)All of the above are true statements.
Q3) Cash Discounts on Sales are
A)a contra account to Accounts Receivable.
B)a contra account to Accounts Payable.
C)a contra account to gross sales.
D)an adjunct account to gross sales.
E)neither an addition nor a deduction to gross sales.
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8
Chapter 7: Inventories and Cost of Goods Sold
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Sample Questions
Q1) In a periodic inventory system the quantity of ending inventory is determined by
A)subtracting units sold from units purchased.
B)a physical inventory count.
C)looking at the balance in the inventory account.
D)subtracting cost of goods sold from the beginning inventory balance.
E)adding units sold to the beginning inventory balance.
Q2) An increase in the replacement cost of the inventory held during the current period is referred to as a holding gain.
A)True
B)False
Q3) LIFO results in a more accurate valuation of ending inventory on the balance sheet than does FIFO.
A)True
B)False
Q4) If ending inventory is overstated by $5,000 in 20X3,retained earnings will be overstated in 20X3.
A)True
B)False
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9
Chapter 8: Long-Lived Assets
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Sample Questions
Q1) Goetz Construction Company constructed a shed for Paramount Industries.Instead of giving cash,Paramount Industries,gave Goetz Construction Company a used delivery truck originally costing Paramount Industries,$52,000.The book value for the delivery truck on the financial statements of Paramount Industries showed the delivery truck with a value of $40,000.A new delivery truck is currently selling for $44,000,and an independent appraiser said the fair value of the used delivery truck is $48,000.What value should Paramount Industries assign to the shed on its financial statements?
A)$39,000
B)$52,000
C)$40,000
D)$44,000
E)$48,000
Q2) Regardless of the depreciation method used,accumulated depreciation will be the same when the asset is fully depreciated.
A)True
B)False
Q3) Accounting for changes in useful life is prospective in nature.
A)True
B)False
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Page 10
Chapter 9: Liabilities and Interest
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Sample Questions
Q1) On the day of issuance of bonds,the proceeds to the issuer may be above par or below par,depending on market conditions.If the proceeds are above par,the bonds have been sold at a discount.
A)True
B)False
Q2) A callable bond is one in which the bondholder can sell the bond back to the company,even if the company does not want the bond returned.
A)True
B)False
Q3) When the market interest rate is 13% and the coupon rate is 10%,a bond sells at A)a discount.
B)a premium.
C)par.
D)liquidation value.
E)Cannot be determined without more information
Q4) Corporations pay taxes in one lump sum at the end of the year.
A)True
B)False
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) Which statement about preferred stock is incorrect?
A)Callable preferred stock gives the issuing company the right to purchase the preferred stock back from the shareholder.
B)The call price on callable preferred stock is set below the par or issue price of the stock to compensate for the call feature.
C)Convertible preferred stock gives the owners of the stock the right to exchange their preferred stock for common stock.
D)Convertible preferred stock can be expected to have a lower dividend percentage than a similar nonconvertible preferred stock.
E)Participating preferred stock can receive a larger dividend than the prespecified dividend when a company has an especially good year.
Q2) Earnings per share will tend to increase with the purchase of treasury stock.
A)True
B)False
Q3) A stock split can be accounted for as a large stock dividend.
A)True
B)False
Q4) In general,what are the principal rights of shareholders?
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Page 12
Chapter 11: Intercorporate Investments and Consolidations
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Sample Questions
Q1) The investor will debit Investment in Bonds when the premium on a held-to-maturity security is amortized.
A)True
B)False
Q2) As the market value of available-for-sale securities changes,companies report the gains from increases in market value and losses from decreases in market value on the income statement.
A)True
B)False
Q3) Comprehensive income includes both net income and the change in market value of available-for-sale securities.
A)True
B)False
Q4) Debt securities classified as available-for-sale securities are carried at amortized cost on the balance sheet.
A)True
B)False
Q5) Describe spin-offs including the benefits to spinning off a segment.
Q6) Describe reasons and benefits to corporate mergers.
Page 13
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) A cross-sectional evaluation of financial ratios involves comparing a company's financial ratios with the ratios of other companies.
A)True
B)False
Q2) Debt is often a more attractive vehicle for financing long-term investments for which of the following reasons? 1.Debt is less risky than common stock.
2)Debt may be converted into common stock in a tax-free exchange.
3)Interest payments are tax deductible,and dividend payments are not.
4)Ownership rights are kept by the present stockholders.
A)3 and 4
B)1 and 3
C)2 and 4
D)1 and 2
E)1,2,3,and 4
Q3) The cornerstone of financial statement analysis is the use of ratios.
A)True
B)False
Q4) Describe several advantages and several disadvantages to investor access to the Internet.
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